A Roadmap to Michigan's Future - Millennium Project - University of ...

Enterprise Systems
R&D Outsourcing
A Roadmap to Michigan’s Future:
Meeting the Challenge of a
Global Knowledge-Driven Economy
A Strategic Roadmapping Exercise
James J. Duderstadt, Project Director
The Millennium Project
The University of Michigan
September, 2005
Global, Knowledge-Driven Economy
Products, Systems, Services
Vertical Integration
Horizontal Integration
Political Influence
Public Relations
Customer Relations
Management
Sales
Manufacturing
Product Development
Suppliers
Bus Proc Outsourcing
Innovation Off-shoring
Social
Sciences
Liberal
Arts
Professions
R&D
Business, Public Policy
International Relations
Micro-sciences
(Info-bio-nano)
Macro-sciences
(Complex systems)
Applied sciences
Eng, Med, Ag, Arch
NEW KNOWLEDGE
(R&D, Innovation)
HUMAN CAPITAL
(Lifelong learning)
INFRASTRUCTURE
(higher ed, labs, cyber)
POLICIES
(R&D, tax, IP)

@ 2005 The Millennium Project, The University of Michigan
All rights reserved.
The Millennium Project
The University of Michigan
2001 Duderstadt Center
2281 Bonisteel Boulevard
Ann Arbor, MI 48109-2094
http://milproj.dc.umich.edu

Executive Summary
Investing in human capital…and the future!
Michigan’s old manufacturing economy is dying,
slowly but surely, putting at risk the welfare of millions
of citizens in our state in the face of withering competition
from an emerging global knowledge economy. For
many years now we have seen our low-skill, high-pay
factory jobs increasingly downsized, outsourced, and
offshored, only to be replaced by low-skill, low-pay service
jobs–or in too many cases, no jobs at all and instead
the unemployment lines. Preoccupied with obsolete political
battles, addicted to entitlements, and assuming
what worked before will work again, Michigan today is
sailing blindly into a profoundingly different future.
Thus far our state has been in denial, assuming our
low-skill workforce would remain competitive and our
factory-based manufacturing economy would be prosperous
indefinitely. Yet that 20th-century economy will
not return. Our state is at great risk, since by the time
we come to realize the permanence of this economic
transformation, the out-sourcing/off-shoring train may
have left town, taking with it both our low-skill manufacturing
jobs and many of our higher-paying service
jobs.
Michigan is certainly not alone in facing this new
economic reality. Yet as we look about, we see other
states, not to mention other nations, investing heavily
and restructuring their economies to create high-skill,
high-pay jobs in knowledge-intensive areas such as
new technologies, financial services, trade, and professional
and technical services. From California to North
Carolina, Bangalore to Shanghai, there is a growing recognition
throughout the world that economic prosperity
and social well-being in a global knowledge-driven
economy require public investment in knowledge
resources. That is, regions must create and sustain a
highly educated and innovative workforce, supported
through policies and investments in cutting-edge technology,
a knowledge infrastructure, and human capital
development.
Ironically, a century ago Michigan led the nation
in building just such knowledge resources. It created
a great education system aimed at serving all of its
citizens, demonstrating a remarkable capacity to look
to the future and a willingness to take the actions and
make the investments that would yield prosperity and
well-being for future generations. Yet today this spirit
of public investment for the future appears missing.
Decades of failed public policies and inadequate investment
now threaten the extraordinary educational
and knowledge resources built through the vision
and sacrifices of past generations. Ironically, at a time
when the rest of the world has recognized that investing
in education and knowledge creation is the key to
not only prosperity but, indeed, survival, too many of
Michigan’s citizens and leaders, in both the public and
private sector, have come to view such investments as a
low priority, expendable during hard times. The aging
baby boomer population that now dominates public
policy in our state demands instead expensive health
care, ever more prisons, homeland security, and reduced
tax burdens, rather than investing in education,
innovation, and the future.
Beyond a commitment to educational opportunity,
there is another key to economic prosperity: technological
innovation. As the source of new products and
services, innovation is directly responsible for the most
dynamic sectors of the U.S. economy. Here our nation
has a great competitive advantage, since our society is
based on a highly diverse population, democratic values,
and free-market practices. These factors provide an

ii
New Knowledge
(Research)
Human Capital
(Education)
Infrastructure
(Facilities, Systems)
Policies
(Tax, IP, R&D)
Innovation
The Keys to Innovation
National Priorities
Economic Competitiveness
National and Homeland Security
Public health and social well-being
Global Challenges
Global Sustainability
Geopolitical Conflict
Opportunities
Emerging Technologies
Interdisciplinary Activities
Complex, Large-scale Systems
unusually fertile environment for technological innovation.
Once again Michigan provided leadership in the
20th century, first putting the world on wheels and then
becoming the arsenal of democracy.
However, history has also shown that significant
public investment is necessary to produce the essential
ingredients for innovation to flourish: new knowledge
(research), human capital (education), infrastructure
(facilities, laboratories, communications networks),
and policies (tax, intellectual property). Other nations
are beginning to reap the benefits of such investments
aimed at stimulating and exploiting technological innovation,
creating serious competitive challenges to American
industry and business both in the conventional
marketplace (e.g., Toyota) and through new paradigms
such as the off-shoring of knowledge-intensive services
(e.g., Bangalore, Shanghai). Yet again, at a time when
our competitors are investing heavily in stimulating
the technological innovation to secure future economic
prosperity, Michigan is missing in action, significantly
under-investing its economic and political resources in
planting and nurturing the seeds of innovation.
Adequately supporting education and technological
innovation is not just something we would like to
do; it is something we have to do. What is really at stake
here is building Michigan’s regional advantage, allowing
it to compete for prosperity, for quality of life, in an
increasingly competitive world. In a knowledge-intensive
society, regional advantage is not achieved through
gimmicks such as lotteries and casinos. It is achieved
through creating a highly educated and skilled workforce.
It requires an environment that stimulates creativity,
innovation, and entrepreneurial behavior. Specifically,
it requires public investment in the ingredients
of innovation–educated people and new knowledge.
Put another way, it requires public purpose, policy, and
investment to create a knowledge society competitive
in a global economy.
This study has applied the planning technique of
strategic roadmapping to provide a framework for the
issues that Michigan must face and the commitments
that we must make, both as individuals and as a state,
to achieve prosperity and social well-being in a global
knowledge economy. The roadmapping process was
originally developed in the electronics industry and
is applied frequently to major federal agencies such
as the Department of Defense and NASA. Although
sometimes cloaked in jargon such as environmental
scans, resource maps, and gap analysis, in reality the
roadmapping process is quite simple. It begins by asking
where we are today, then where we wish to be tomorrow,
followed by an assessment of how far we have
to go, and finally concludes by developing a roadmap
to get from here to there. The roadmap itself usually
consists of a series of recommendations, sometimes divided
into those that can be accomplished in the near
term and those that will require longer-term and sustained
effort.
By any measure, the assessment of Michigan today is
very disturbing. Our state is having great difficulty in
making the transition from a manufacturing to a knowledge
economy. In recent years we have led the nation in
unemployment, and our leading city, Detroit, now ranks
as the nation’s poorest. Furthermore, the out-migration
of young people in search of better jobs is the fourth
most severe among the states; our educational system
is underachieving with one-quarter of Michigan adults
without a high school diploma and only one-third of
Michigan today: Still dependent on a factory economy
as illustrated by automotive plant locations. (MDLEG)

iii
at the graduate level. Beyond this goal, the state should
commit itself to providing high-quality, cost-effective,
and diverse educational opportunities to all of its citizens
throughout their lives, since during an era of rapid
economic change and market restructuring, the key to
employment security has become continual, lifelong
education.
Drastic cuts in state appropriations over the past
five years are crippling the state’s public universities.
high school graduates college-ready. Fewer than onequarter
of Michigan citizens have college degrees. Although
Michigan’s system of higher education is generally
regarded as one of the nation’s finest, the erosion of
state support over the past two decades and most seriously
over the past five years–with appropriation cuts
to public universities ranging from 20% to 40%–has not
only driven up tuition but put the quality and capacity
of our public universities at great risk.
More generally, for many years Michigan has been
shifting public funds and private capital away from investing
in the future through education, research, and
innovation to fund instead short term priorities such as
prisons while inacting tax cuts that have crippled state
revenues. And all the while, as the state budget began
to sag and eventually collapsed in the face of a weak
economy, public leaders were instead preoccupied with
fighting the old and increasingly irrelevant cultural
and political wars (cities vs. suburbs vs. exurbs, labor
vs. management, religious right vs. labor left). In recent
years the state’s motto has become “Eat dessert first; life
is uncertain!” Yet what Michigan has really been consuming
is the seed corn for its future.
A vision for Michigan tomorrow can best be addressed
by asking and answering three key questions:
1. What skills and knowledge are necessary for individuals
to thrive in a 21st-century, global, knowledge-intensive
society Clearly a college education has become mandatory,
probably at the bachelor’s level, and for many,
2. What skills and knowledge are necessary for a population
(workforce) to provide regional advantage in such a competitive
knowledge economy Here it is important to stress
that we no longer are competing only with Ohio, Ontario,
and California. More serious is the competition from
the massive and increasingly well-educated workforces
in emerging economies such as India, China, and the
Eastern Bloc. For such knowledge workers, there is little
distinction between work and education, since rapid
technological change in a global economy requires the
continuous improvement of workforce skills.
3. What level of new knowledge generation (e.g., R&D,
innovation, entrepreneurial zeal) is necessary to sustain a
21st-century knowledge economy, and how is this achieved
Here it is increasingly clear that the key to global competitiveness
in regions aspiring to a high standard of
living is innovation. And the keys to innovation are
new knowledge, human capital, infrastructure, and
forward-looking public policies. Not only must a region
match investments made by other states and nations
in education, R&D, and infrastructure, but it must
The World
UM, MSU
The State
Michigan Tomorrow
A Digital “Catholepistimead” or “Society of Learning
Cultural
Universitas
Colleges and Universities
Gymnasia
Schools
Corporate R&D centers
High tech startups
Knowledge networks
Families
Cyberinfrastructure
Michigan-Link
Michigan Broadband
Internet2, National Lamba Rail, etc.
Digital Libraries
Virtual Universities, Global Universities
The Region (Great Lakes)
UM, MSU
The Nation
Michigan tomorrow: a knowledge economy

iv
recognize the inevitability of new innovative, technology-driven
industries replacing old obsolete and dying
industries as a natural process of “creative destruction”
(a la Schumpeter) that characterizes a hypercompetitive
global economy.
So how far does Michigan have to travel to achieve a
knowledge economy competitive at the global level
What is the gap between Michigan today and Michigan
tomorrow This part of the roadmapping process does
not require a rocket scientist. One need only acknowledge
the hopelessness in the faces of the unemployed,
or the backward glances of young people as they leave
our state for better jobs, or the angst of students and
parents facing yet another increase in college costs as
state government once again cuts appropriations for
higher education. To paraphrase Thomas Friedman,
“The world is flat! Globalization has collapsed time and
distance and raised the notion that someone anywhere
on earth can do your job, more cheaply. Can Michigan
rise to the challenge on this leveled playing field”
So, what do we need to do What is the roadmap to
Michigan’s future In a knowledge-intensive economy,
regional advantage in a highly competitive global marketplace
is achieved through creating a highly educated
and skilled workforce. It requires an environment that
stimulates creativity, innovation, and entrepreneurial
behavior. Experience elsewhere has shown that visionary
public policies and significant public investments
in high-skilled human capital, research and innovation,
and infrastructure are necessary to sustain a knowledge
economy.
education from both public and private sources as well as significant
changes in public policy. It will also likely require
a dedicated source of tax revenues to achieve and secure the
necessary levels of investment during a period of gridlock in
state government, perhaps through a citizen-initiated referendum.
This, in turn, will require a major effort to build
adequate public awareness of the importance of higher education
to the future of the state and its citizens.
2. To achieve and sustain the quality of and access to educational
opportunities, Michigan needs to move into the top
quartile of states in its higher education appropriations (on
a per student basis) to its public universities. To achieve this
objective, state government should set a target of increasing
by 30% (beyond inflation) its appropriations to its public
universities over the next five years.
3. The increasing dependence of the knowledge economy
on science and technology, coupled with Michigan’s relatively
low ranking in percentage of graduates with science and
engineering degrees, motivates a strong recommendation to
state government to place a much higher priority on providing
targeted funding for program and facilities support in
these areas in state universities, similar to that provided in
California, Texas, and many other states. In addition, more
effort should be directed toward K-12 to encourage and adequately
prepare students for science and engineering studies,
including incentives such as forgivable college loan programs
in these areas (with forgiveness contingent upon completion
of degrees and working for Michigan employers). In addition,
The Roadmap: The Near Term (...now!...)
For the near term our principal recommendations
focus on changing policies for investing in higher education,
research, and innovation, while providing our
institutions with the capacity to become more agile and
market-smart.
Human Capital
1. Michigan simply must increase the participation of its
citizens in higher education at all levels–community college,
baccalaureate, and graduate and professional degrees. This
will require a substantial increase in the funding of higher
New engineering students

state government should strongly encourage public universities
to recruit science and engineering students from other
states and nations, particularly at the graduate level, perhaps
even providing incentives if they accept employment following
graduation with Michigan companies.
4. Colleges and universities should place far greater emphasis
on building alliances that will allow them to focus
on unique core competencies while joining with other institutions
in both the public and private sector to address the
broad and diverse needs of society in the face of today’s social,
economic, and technological challenges while addressing
the broad and diverse needs of society. For example, research
universities should work closely with regional univerisities
and independent colleges to provide access to cutting-edge
knowledge resources and programs.
New Knowledge (R&D, innovation)
5. The quality and capacity of Michigan’s learning and
knowledge infrastructure will be determined by the leadership
of its public research universities in discovering new knowledge,
developing innovative applications of those discoveries
that can be transferred to society, and educating those capable
of working at the frontiers of knowledge and the professions.
State government should strongly support the role of these
institutions as sources of advanced studies and research by
dramatically increasing public support of research infrastructure,
analogous to the highly successful Research Excellence
Fund of the 1980s. Also key will be enhanced support of the
efforts of regional colleges and universities to integrate this
new knowledge into academic programs capable of providing
lifelong learning opportunities of world-class quality while
supporting their surrounding communities in the transition
to knowledge economies.
6. In response to such reinvestment in the research capacity
of Michigan’s universities, they, in turn, must become
more strategically engaged in both regional and statewide
economic development activities. Intellectual property policies
should be simplified; faculty and staff should be encouraged
to participate in the startup and spinoff of high-tech
business; and universities should be willing to invest some
of their own assets (e.g., endowment funds) in state- and region-based
venture capital activities. Furthermore, universities
and state government should work more closely together
to go after major high tech opportunities in both the private
sector (attracting new knowledge-based companies) and federal
initiatives).
7. Michigan must also invest additional public and private
resources in private-sector initiatives designed to stimulate
R&D, innovation, and entrepreneurial activities. Key
elements would include reforming state tax policy to encourage
new, high-tech business development, securing sufficient
venture capital, state participation in cost-sharing for federal
research projects, and a far more aggressive and effective effort
by the Michigan Congressional delegation to attract major
federal research funding to the state.
Infrastructure
Ultra-high power laser laboratory
8. Providing the educational opportunities and new
knowledge necessary to compete in a global, knowledge-driven
economy requires an advanced infrastructure: educational
and research institutions, physical infrastructure such as
laboratories and cyberinfrastructure such as broadband networks,
and supportive policies in areas such as tax and intellectual
property. Michigan must invest heavily to transform
the infrastructure for a 20 th -century manufacturing economy
into that required for a 21 st -century knowledge economy. Of
particular importance is a commitment by state government
to provide adequate annual appropriations for university capital
facilities comparable to those of other leading states. It is

vi
also important for both state and local government to play a
more active role in stimulating the development of pervasive
high speed broadband networks, since experience suggests
that reliance upon private sector telcom and cable monopolies
could well trap Michigan in a cyberinfrastructure backwater
relative to other regions (and nations).
Policies
9. As powerful market forces increasingly dominate public
policy, Michigan’s higher-education strategy should become
market-smart, investing more public resources directly
in the marketplace through programs such as vouchers, needbased
financial aid, and competitive research grants, while
enabling public colleges and universities to compete in this
market through encouraging greater flexibility and differentiation
in pricing, programs, and quality aspirations.
10. Michigan should target its tax dollars more strategically
to leverage both federal and private-sector investment
in education and R&D. For example, a shift toward higher
tuition/need-based financial aid policies in public universities
not only leverages greater federal financial aid but also
avoids unnecessary subsidy of high-income students. Furthermore
greater state investment in university research capacity
would leverage greater federal and industrial support
of campus-based R&D.
11. Key to achieving the agility necessary to respond to
market forces will be a new social contract negotiated between
the state government and Michigan’s public colleges
and universities, which provides enhanced market agility in
return for greater (and more visible) public accountability
with respect to quantifiable deliverables such as graduation
rates, student socioeconomic backgrounds, and intellectual
property generated through research and transferred into the
marketplace.
economic prosperity, social well-being, and national
security. Moreover, education, knowledge, innovation,
and entrepreneurial skills have also become the primary
determinants of one’s personal standard of living
and quality of life. We believe that democratic societies–including
state and federal governments–must
accept the responsibility to provide all of their citizens
with the educational and training opportunities they
need, throughout their lives, whenever, wherever, and
however they need it, at high quality and at affordable
prices.
To this end, the long-term roadmap proposes a vision
of the future in which Michigan strives to build
a knowledge infrastructure capable of adapting and
evolving to meet the imperatives of a global, knowledge-driven
world. Such a vision is essential to create
the new knowledge (research and innovation), a skilled
workforce, and the infrastructure necessary for Michigan
to compete in the global economy while providing
citizens with the lifelong learning opportunities and
skills they need to live prosperous and secure lives in
our state. As steps toward this vision, we recommend
the following actions:
1. Michigan needs to develop a more systemic and strategic
perspective of its educational, research, and cultural institutions–both
public and private, formal and informal–that
views these knowledge resources as comprising a knowledge
ecology that must be allowed and encouraged to adapt and
evolve rapidly to serve the needs of the state in a change driven
world, free from micromanagement by state government
or intrusion by partisan politics.
The Roadmap (longer term...but within a decade...)
For the longer term, our vision for the future of
higher education is shaped very much by the recognition
that we have entered an age of knowledge in a
global economy, in which educated people, the knowledge
they produce, and the innovation and entrepreneurial
skills they possess have become the keys to
Diverse institutions for diverse needs.

vii
2. Michigan should strive to encourage and sustain
a more diverse system of higher education, since institutions
with diverse missions, core competencies, and funding
mechanisms are necessary to serve the diverse needs of its
citizens, while creating an knowledge infrastructure more resilient
to the challenges presented by unpredictable futures.
Using a combination of technology and funding policies, efforts
should be made to link elements of Michigan’s learning,
research, and knowledge resources into a market-responsive
seamless web, centered on the needs and welfare of its citizens
and the prosperity and quality of life in the state rather than
the ambitions of institutions and political leaders.
3. Serious consideration should be given to reconfiguring
Michigan’s educational enterprise by exploring new
paradigms based on the best practices of other regions and
nations. For example, the current segmentation of learning
(e.g., primary, secondary, collegiate, graduate-professional,
workplace) is increasingly irrelevant in a competitive world
that requires lifelong learning to keep pace with the exponential
growth in new knowledge. More experimentation both in
terms of academic programs and institutional types should
be encouraged.
4. The quality and capacity of Michigan’s learning and
knowledge infrastructure will be determined by the leadership
of its two AAU-class research universities, UMAA and
MSU, in discovering new knowledge, developing innovative
applications of these discoveries that can be transferred to society,
and educating those capable of working at the frontiers
of knowledge and the professions. In this sense, UMAA and
MSU should be encouraged to evolve more toward a “universitas”
character, stressing their roles as sources of advanced
knowledge and learning rather than focusing on providing
general education (or socialization) at the undergraduate
level.
5. While it is natural to confine state policy to state
boundaries, in reality such geopolitical boundaries are of no
more relevance to public policy than they are to corporate
strategies in an ever more integrated and interdependent
global society. Hence Michigan’s strategies must broaden to
include regional, national, and global elements, including the
possibility of encouraging the state’s two flagship research
universities, the University of Michigan and Michigan State
University, to join together to form a true world university,
capable of assisting the state to access global economic and
human capital markets.
6. Michigan’s research universities should explore new
models for the transfer of knowledge from the campus into the
marketplace, including the utilization of endowment capital
(perhaps with state match) to stimulate spinoff and startup
activities and exploring entirely new approaches such as
“open source – open content paradigms” in which the intellectual
property created through research and instruction
is placed in the public domain as a “knowledge commons,”
available without restriction to all, in return for strong public
support.
7. Michigan should explore bold models aimed at producing
the human capital necessary to compete economically
with other regions (states, nations) and provide its
citizens with prosperity and security. Lifelong learning will
not only become a compelling need of citizens (who are only
one paycheck away from the unemployment line in a knowledge-driven
economy), but also a major responsibility of the
state and its educational resources. One such model might
be to develop a 21st-century analog to the G.I. Bill of the post
WWII era that would provide–indeed, guarantee–all Michigan
citizens with access to abundant, high-quality, diverse
learning opportunities throughout their lives, and adapts to
their ever-changing needs
8. Michigan should develop a leadership coalition–involving
leaders from state government, industry, labor, education,
and concerned citizens–with vision and courage sufficient to
challenge and break the stranglehold of the past on Michigan’s
future!
Although this roadmapping exercise was for a specific
state, we believe it offers a possible model of how
regions can utilize the roadmapping process to develop
their own unique paths to future prosperity, security,
and social well-being for their citizens. We are currently
engaged in further studies about how such regional
technology roadmapping efforts can be applied
to multiple-state regions or even nation-states. In an
Epilogue section, we have suggested broadening this
roadmapping activity to include the entire Great Lakes
region, encompassing those states that once comprised
the manufacturing center of the world. We suggest that

viii
Roadmapping for the Great Lakes states
(Scott Swanm, CSCAR, 2003)
these states could build on the unique capacity of the
region’s flagship research universities to build strong
regional advantage in a global, knowledge-driven
economy. While such a regional plan would require
considerable leadership at the level of both the state
(governors) and higher education (university leaders),
it could be the key to the economic future of the Great
Lakes states.
Finally, a word about the target audience for this
study. The Michigan Roadmap is intended in part for
leaders in the public sector (the Governor, Legislature,
and other public officials), the business community
(CEOs, labor leaders), higher education leaders, and
the nonprofit foundation sector. However, this report
is also written for those interested, concerned citizens
who have become frustrated with the deafening silence
about Michigan’s future that characterizes our public,
private, and education sectors. The state’s leaders, its
government, industry, labor, and universities, have simply
not been willing to acknowledge that the rest of the
world is changing. They have held fast to an economic
model that is not much different from the one that grew
up around the heyday of the automobile era–an era that
passed long ago.
Michigan is far more at risk than many other states
because its manufacturing-dominated culture is addicted
to an entitlement mentality that has long since
disappeared in other regions and industrial sectors.
Moreover, politicians and the media are both irresponsible
and myopic as they continue to fan the flames of
the voter hostility to an adequate tax base capable of
meeting both today’s urgent social needs and longerterm
investment imperatives such as education and
innovation. As Bill Gates warned, cutting-edge companies
no longer make decisions to locate and expand
based on tax policies and incentives. Instead they base
these decisions on a state’s talent pool and culture for
innovation–priorities apparently no longer valued by
many of Michigan’s leaders, at least when it comes to
tax policy.
To be sure, it is difficult to address issues such as
developing a tax system for a 21st-century economy,
building world-class schools and colleges, or making
the necessary investments for future generations in the
face of the determination of the body politic still clinging
tenaciously to past beliefs and practices. Yet the realities
of a flat world will no longer tolerate procrastination
or benign neglect. In Chapter 7 we have broadened
the discussion to suggest several ideas for breaking this
public policy logjam to facilitate the implementation of
the recommendations of the Michigan Roadmap.
Finally, it should be acknowledged that much of the
rhetoric used in this report is intentionally provocative–if
not occasionally incendiary. But recall here that
old saying that sometimes the only way to get a mule
to move is to whack it over the head with a 2x4 first to
get its attention. The Michigan Roadmap is intended as
just such a 2x4 wake-up call to our state. For this effort
to have value, we believe it essential to explore openly
and honestly where our state is today, where it must
head for tomorrow, and what actions will be necessary
to get there. Michigan simply must stop backing into
the future and, instead, turn its attention to making the
commitments and investments today necessary to allow
it to compete for prosperity and social well-being
tomorrow in a global, knowledge-driven economy.

ix
Recommendations
The Near Term
The Longer Term
Today’s Challenge: Enabling Michigan’s transition to a knowledgedriven
economy capable of providing prosperity, security, and
social well-being in a hypercompetitive global economy.
Tomorrow’s Challenge: To provide all of Michigan’s citizens with the
education and training they need, throughout their lives,
whenever, wherever, and however they desire it,
at high quality, and affordable cost.
Key Vision:
To invest more adequately, strategically, and intelligently.
Key Vision: To develop a knowledge society
capable of responding to the imperatives of
a 21st century, global, knowledge-driven society.
Investment Goals:
…human capital (lifelong learning)
…new knowledge (research, innovation, entrepreneurism)
…infrfastructure (institutions, labs, cyber)
…policy (tax, investment, intellectual property)
Goal: A society of learning, capable of adapting and evolving
rapidly to provide learning opportunities, knowledge,
and innovation during a period of extraordinary change.
The Elements:
The Elements:
1. Increase participation of all citizens in higher education.
2. Move Michigan into top quartile in higher ed investments.
3. Targeted state investment in science and engineering.
4. Stress alliances among Michigan’s colleges and universities.
5. Michigan should increase investments in university research
infrastructure (similar to Reseach Excellence Fund).
6. Michigan universities should become more engaged in
tech transfer and economic development.
7. Michigan should develop incentives (including tax policy) to
stimulate private sector R&D and innovation.
8. Public investment in infrastructure such as broadband is critical.
9. Michigan should invest more in higher education marketplace
(particularly need-based financial aid).
10. State funds should be used to leverage private and federal funds.
11. State universities should be provided with agility to adapt to
market, subject to accountability measures.
1. Michigan must develop a more systemic and strategic approach
to its knowledge resources.
2. The state should encourage more diversity in institutions.
3. New paradigms for K-16 education should be explored.
4. UM and MSU should be encouraged to stress advanced education
and research.
5. UM and MSU should be encouraged to develop capacity to
access global markets.
6. Michigan’s universities should explore bolder models of tech
transfer, spinoffs, and startup activities.
7. Michigan should consider bolder models for producing human
capital such as a 21st century version of the G.I. Bill that
guarantees lifelong educational opportunities for all
citizens.

Contents
Executive Summary
Acknowledgements
Chapter 1: Introduction
Some Symptoms of Our Plight
Questions Concerning Michigan’s Future
Purpose of the Study
Several Caveats
Chapter 2: Setting the Context: An Environmental
Scan
Challenge One: The Knowledge Economy
Challenge Two: Globalization
Challenge Three: Demographics
Challenge Four: Exponentiating Technologies
The Implications
Tomorrow’s Horizon
Hakuna Matata
Chapter 3: Michigan Today: A Knowledge Resource
Map
The Michigan Economy
Educational Resources
Human Capital
Research and Development
Other Assets
The Writing on the Wall
Chapter 4: Michigan Tomorrow: A Knowledge Society
The Educational Needs of a 21st Century
Citizen
Building a Competitive Workforce
The Importance of Technological Innovation
The Future of Public Higher Education
A New Social Contract
Over the Horizon
A Vision for Michigan’s Future: A Knowledge
Society
Chapter 5: How Far Do We Have to Go The Gap
Analysis
Michigan’s Challenge: Economic
Transformation
Higher Education in Michigan: A Critical
Asset at Great Risk
Broader Human Capital Concerns
The Production of New Knowledge: Research
and Innovation
Entrepreneurs, Startups, and High-Tech
Economic Development
Infrastructure
Challenges at the Federal Level
Public Policy
Public Attitudes: Half Right (Essentially) and
Half Wrong (Terribly!)
Some Lessons from the Past
Chapter 6: The Michigan Roadmap
The Roadmap: The Near Term (…Now!…)
The Roadmap: The Longer Term (…But within
a Decade…)
One Final Recommendation: A Call for
Leadership
Chapter 7: A Broader Agenda
Related Policy Areas
Cultural Challenges
A Final Observation
Chapter 8: An Epilogue: Broadening the Vision of the
Roadmap

xi
Appendix A: A Comparison with the Cherry
Commission Report
Appendix B: The Millennium Project
[Appendix C: A Roadmap for the University of
Michigan]
References

xii
Acknowledgements
As noted earlier, the roadmapping process utilizes
a series of expert panels to define key issues, and then
refines appropriate strategies through focus groups and
sustained dialog. In the case of the Michigan Roadmap,
a guidance group was formed that met frequently to
guide and shape the process and recommendations
over the three-year period of the study. This group included
Marvin Peterson, Dan Atkins, Kathy Willis, Carl
Berger, Bruce Montgomery, Maurita Holland, and was
ably assisted by graduate students Dana Walker and
Laurel Park.
During this period numerous other experts participated
in the process, including Michael Boulus, Doug
Van Houweling, Doug Ross, Craig Ruff, Paul Dimond,
John Austin, Lou Glazer, Donald Grimes, Dan Hurley,
Elizabeth Gerber, and Philip Power. In addition, there
was extensive interaction with the leadership, faculty,
and staff of both public and independent colleges and
universities in Michigan.
More broadly, this effort was coordinated with several
other ongoing projects at the national level, including
major projects of the National Academies chaired by
the director of the Michigan Roadmap (JJD): the IT Forum
studying the impact of information technology on
the future of the research university, the Federal Science
and Technology guidance group of the Committee on
Science, Engineering, and Public Policy of the National
Academies, and the Commission to Assess the Capacity
of United States Engineering Research. Similarly,
other projects involving the director also had influence
on the Roadmap: the Strategic Planning Committee of
the University of California, the Task Force to Develop
a Higher Education Future for Kansas City, and participation
with state and university groups in various regions
(Texas, Colorado, Ohio, North Carolina, Arizona,
Ontario, British Columbia). In addition, the director’s
involvement during this period in several international
groups also informed the study (OECD, the Glion Colloquium).
The director of the Michigan Roadmap project wishes
to acknowledge the contributions of these individuals
and related studies. However it is also important to
stress that this report, including its recommendations,
while very much influenced by these groups, was authored
by the director, who accepts full responsibility
for its language and conclusions–particularly the more
provocative language and controversial recommendations.
Finally, it is important to state at the outset that
this study was supported by an independent nonprofit
foundation, the Atlantic Philanthropies, which has long
been one of the most generous and effective patrons of
higher-education research. We are deeply grateful for
their support, encouragement, and guidance. We are
also grateful for the independence enabled by their support
that has allowed us to approach this project with
a level of creativity and candor unusual in the publicpolicy
arena.
JJD
Ann Arbor
September, 2005

Chapter 1
Introduction
“It is not the strongest of the species that survive,
nor the most intelligent, but rather the ones
most responsive to change.” – Charles Darwin
So what’s the problem Why is there a need for yet
another study of the future of the state of Michigan
The reason is simple: Michigan’s old factory-based
manufacturing economy is dying, slowly but surely,
putting at risk the welfare of millions of citizens in
our state, in the face of withering competition from an
emerging global economy driven by knowledge and innovation.
From California to North Carolina, Dublin to
Bangalore, other regions, states, and nations are shifting
their public policies and investments to support the new
imperatives of a knowledge economy such as knowledge
creation (research, innovation, entrepreneurial activities),
human capital (lifelong learning and advanced
education, particularly in science and engineering), and
infrastructure (colleges and universities, research laboratories,
broadband networks). As Thomas Friedman
puts it, “The world is flat! Globalization has collapsed
time and distance and raised the notion that someone
anywhere on earth can do your job, more cheaply. Can
we rise to the challenge on this leveled playing field”
(Friedman, 2005).
Yet in Michigan there is a deafening silence about
the implications of a global, knowledge-driven global
economy for our state’s future. There is little evidence
of effective policies, new investments, or visionary
leadership capable of reversing the downward spiral
of Michigan’s economy. For whatever reason, leaders
in the state’s public and private sectors continue to
cling tenaciously to past beliefs and practices, preoccupied
with obsolete and largely irrelevant issues (e.g.,
the culture wars, entitlements, tax cuts or abatements,
and gimmicks such as lotteries and casinos) rather than
developing strategies, taking actions, and making the
necessary investments to achieve economic prosperity
and social well-being in the new global economic order.
Preoccupied with obsolete political battles, addicted to
entitlements, and assuming that what worked before
will work again, Michigan today is sailing blindly into
a profoundly different future.
For many years now we have seen our low-skill,
high-pay factory jobs downsized by increasing productivity,
shifted to lower cost states, or outsourced to lowwage
countries. We have fallen behind the rest of the
nation in adding high value-added service firms and
jobs during the transition to a knowledge economy. According
to a recent study at the University of Michigan,
our state lost 254,000 jobs from 2000 to 2003, a 22% decline,
including 163,000 manufacturing jobs. (Glazer,
2005). In 2004, Michigan had the worst performing state
economy in the nation, ranking as the only state that
has lost more jobs than it created, according to the Joint
Economic Committee of Congress. Detroit has recently
become the nation’s poorest city, with over one-third of
its residents living below the federal poverty level (U.S.
Census Bureau, 2005). Yet if we look about, we see other
states, not to mention other nations, investing heavily
and restructuring their economies to create high-skill,
high-wage jobs in areas such as information services,
financial services, trade, and professional and technical
services.
For decades the leadership of this state–whether in
state government, corporations, labor, cities, or colleges
and universities–has been backing into the future, hoping
in vain that our factory-based manufacturing economy
would return. Yet that manufacturing economy,
so dominant in a 20th-century world, has not returned,

and the risk of today’s myopia is that by the time we
have come to realize the permanence of this economic
transformation, the out-sourcing and off-shoring train
will have left the station, taking with it the rest of our
good jobs.
Perhaps nowhere is this inability to read the writing
on the wall more apparent that in our state’s approach
to the development of the human resources and new
knowledge necessary to compete in a global, knowledge-driven
economy. Michigan’s strategies and policies
with respect to advanced learning and knowledge
production have been woefully inadequate, all too often
political in character, and largely reflecting a state
of denial about the imperatives of the emerging global
economy.
Some Symptoms of Our Plight
During the last half of the 20th century, Michigan
saw many of its low-skill, high-wage manufacturing
jobs downsized as companies restructured to increase
productivity and outsourced to lower wage states and
nations to reduce costs. Today our state is beginning
to experience the same phenomenon with higher-skill
service jobs through off-shoring to emerging economies
such as India, China, and the Eastern Bloc nations.
While labor cost is certainly a factor, more important
has been the determination of these regions to invest
heavily in educating a highly skilled, high-quality
workforce in key economic sectors. This has happened
during a period when Michigan has been largely asleep
at the wheel, assuming our low-skill workforce would
remain competitive and our factory-based manufacturing
economy would prosper indefinitely.
It may seem surprising that a state, which a century
and a half ago led the nation in its commitment to building
a great public education system aimed at serving
all of its citizens, would be failing today in its human
resource development. Perhaps it is ironic that a state
with seemingly infinite resources of fur, timber, iron,
and copper—a state with boundless confidence in the
future—should have played such a leadership role in
developing the models of higher education that would
later serve all of America. The University of Michigan,
while not the first of the state universities, is nevertheless
commonly regarded as the “mother of public universities”
(Kerr, 1963), responsible for and responsive to
the needs of the people who founded it and supported
it, even as it sought to achieve quality equal to that of the
most distinguished private institutions. Michigan State
University is also regarded as a national leader, the prototype
of the great land-grant universities. And Wayne
State University has provided an important model of
the urban university, serving the needs of one of our
nation’s great cities. When these universities were augmented
by the evolution of Michigan’s comprehensive
and regional universities, community colleges, and independent
colleges, the state gained a justified reputation
for one of the nation’s most forward-looking and
outstanding higher education systems.
What is significant is that the strength of Michigan–
its capacity to build and sustain such extraordinary institutions–arose
from our state’s ability to look to the
future, its willingness to take the actions and make the
investments that would yield prosperity and well-being
for future generations. Yet today this spirit of public
investment for the future has disappeared. Decades of
failed public policies and inadequate investment now
threaten the extraordinary educational resources built
through the vision and sacrifices of past generations. In
our times, state government has come to view public
higher education as low priority and expendable during
hard times in preference to funding other social priorities
such as prisons and politically popular tax relief.
All too frequently the annual appropriation process is
approached more as a political football game rather than
as an opportunity for strategic investment in the future.
It has become painfully evident that our current policies
of inadequate state support for higher education
is destroying Michigan’s long-standing commitment to
providing “an uncommon education for the common
man,” in the words of James Angell, one of the University
of Michigan’s early presidents (Peckham, 1967).
Beyond educational opportunities, there is another
key to economic prosperity: technological innovation.
As the source of new products and services, innovation
is directly responsible for the most dynamic areas of the
U.S. economy. It has become even more critical to our
prosperity and security in today’s hypercompetitive,
global, knowledge-driven economy. Our American culture–based
on a highly diverse population, democratic
values, and free-market practices–provides an unusu-

ally fertile environment for technological innovation.
However, history has also shown that significant public
investment is necessary to produce the essential ingredients
for innovation to flourish: new knowledge (research),
human capital (education), infrastructure (facilities,
laboratories, communications networks), and
policies (tax, intellectual property).
Again, the irony of our state’s plight today is that
Michigan led the world in technological innovation
throughout much of the 20th century. The automobile
industry concentrated in Michigan because of the skills
of our craftsmen, engineers, technologists, and technicians
and the management and financial skills of corporate
leadership as the industry grew to global proportions.
Michigan became the arsenal of democracy during
World War II. While the workforce skills required
by factory manufacturing required only minimal formal
education, technological excellence and skillful
management enabled Michigan corporations to achieve
global impact. Basic research was also key, funded by
industry in world-class laboratories such as the Ford
Scientific Laboratory and the General Motors Research
Laboratory. Michigan also benefited greatly from the
presence of two world-class research universities, the
University of Michigan and Michigan State University.
However, by the late 20th century, shareholders began
demanding short-term strategies to increase quarterly
earnings rather than longer-term investments in
technology key to the future of industry. To be sure,
cost-cutting, total quality management, lean manufacturing,
and just-in-time supply chains were able to enhance
productivity during the 1980s and early 1990s,
albeit at the expense of hundreds of thousands of manufacturing
jobs as companies restructured their workforces.
Unfortunately, such restructuring also eliminated
much of the corporate R&D function, constraining
industry increasingly to technological progress at the
margin rather than based on breakthrough technologies
and innovations. This was compounded by management’s
increasing focus on near-term profits, even
at the expense of longer-term market share. Michigan’s
Washington influence was used more to block federal
regulation in areas such as emissions standards and
fuel economy than attracting additional federal R&D
dollars to the state, thereby ignoring the growing concerns
about issues such as petroleum imports and global
climate change, which would threaten the very viability
of Michigan industry by 2000. As a consequence,
at a time when other states and nations were investing
heavily in stimulating the technological innovation to
secure future economic prosperity, Michigan was missing
in action, significantly under-investing in the seeds
of innovation.
What is really at stake today is building Michigan’s
regional advantage, allowing it to compete for prosperity
and quality of life, in an increasingly competitive
global economy. In a knowledge-intensive society,
regional advantage is not achieved through traditional
political devices such as tax cuts for the wealthy, regulatory
relief of polluters, entitlements for those without
need, or tax-subsidized gimmicks such as lotteries,
casinos, or sports stadiums. A knowledge-based,
competitive economy is achieved through creating a
highly educated and skilled workforce. It requires an
environment that stimulates creativity, innovation, and
entrepreneurial behavior. It requires public investment
in the ingredients of innovation–educated people and
new knowledge–and the infrastructure to support advanced
learning, research, and innovation. Put another
way, it requires strong public purpose, wise public policy,
and adequate investment to create a true knowledge
society.
Questions Concerning Michigan’s Future
Creating a different economic engine that will be
competitive in a knowledge-based, global economy
also demands vision and leadership. It requires all of us
to think about our future and where Michigan might fit
into that future. To illustrate, consider several provocative
questions concerning Michigan’s future:
1. What will the economic engine for our state be
20 years from today Does anybody know Is anybody
thinking about this It certainly won’t be manufacturing,
at least that based on low-skill factory jobs. If this
economic engine is the service sector of our economy,
will these be high-skill, high-wage, knowledge-driven
activities Or will we be flipping burgers and mowing
each other’s lawns, while the most rewarding jobs have
all flown off (rather, zipped off over the Internet) to other
states, regions, and nations

2. Although it may be blasphemy to suggest it, suppose
the price of gasoline in the United States should
move up to its actual cost without artificial subsidies
(currently about $5.00 per gallon in North America). Or
suppose, even more boldly, that within the next two decades
we pass over M. King Hubbert’s peak in global oil
production (and a decade or so later do the same with
natural gas), as an increasing number of geologists are
now predicting (Hirsch, 2005). Do we honestly believe
that Detroit’s automobile industry could survive a future
where fossil fuels have either disappeared or have
become too expensive to use in transportation And if
you still have confidence in that industry’s technological
ingenuity to come up with alternatives such as hydrogen-based
fuels or electric vehicles (although with no
fossil fuels, this would imply a massive commitment to
nuclear power), then suppose further that information
and communications technologies continue to evolve
at the pace of Moore’s Law, a thousand-fold within a
decade, a million-fold within two decades, and so on.
What is the role of transportation in a world in which
we can faithfully replicate any aspect of human interaction–sight,
sound, touch, taste, smell–with perfect fidelity
at a distance (the “stim-sim” experience suggested
by science fiction writers) (Gibson, 1983)
3. As Michigan’s population ages, what will our
workforce look like We already have seen the out-migration
of young adults in the 25-44 age range, leaving
behind an aging baby-boomer population demanding
priorities such as expensive health care, even more prisons,
homeland security, and reduced tax burdens, to
the neglect of education–and the future (Kristof, 2005).
Suppose human life span were to double during the
21st century, as it did during the 20th century (from 40
to 80 years). Beyond the challenge of maintaining an appropriate
balance between consumption for our present
desires and investment for our children’s future with
a retired generation, how can we provide educational
resources capable of keeping our citizens competitive
over working careers that may be several more decades
in length Certainly not by confining their education to
their early years.
4. In Alice Through The Looking Glass, the Red Queen
warns: “Now, here, you see, it takes all the running you
can do, to keep in the same place. If you want to get
somewhere else, you must run at least twice as fast as
that!” (Brown, 2003). And such is life in today’s global,
knowledge-driven economy where only world-class
products and services survive. But just what Michigan
assets are sufficiently world-class to compete, to run
twice as fast, particularly if today’s artificial barriers
were removed (e.g., trade restrictions, tax subsidies,
perhaps even time and space if Moore’s Law remains
valid) Our companies Our universities The quality
of our workforce The quality of our business environment
The quality of our government Our weather
Or none of the above
Purpose of the Study
So, what to do That is the goal of this study: to develop
a plan for building a learning and knowledge
infrastructure for a regional area such as the State of
Michigan. The plan needs to address the life-long educational
needs of its citizens and the workforce skills
necessary to compete and flourish in a global, knowledge-intensive
economy. In addition, we need to address
how to build the sources of knowledge and innovation
necessary to create world-class companies and a
world-class living environment.
There are many approaches to such a study. Most
common are strategic planning exercises, which progress
through the usual sequence: 1) mission and vision,
2) environmental assessment, 3) goals, 4) strategic actions,
5) tactical implementation, and 6) assessment
and evaluation. An alternative is scenario planning, in
which one develops several scenarios or stories of possible
futures that usually illustrate limiting cases while
taking advantage of the power of the narrative.
But this study is somewhat different. In the first
place, it is heavily based on technology–what exists
today and what is likely to be available in the future.
After all, since technology itself is contributing to many
of our challenges–globalization, off-shoring, the obsolescence
of our manufacturing companies and our
low-skill workforce–it is understandable that we might
want to examine technology as a possible opportunity
as well as a certain threat.
In fact, the study itself has adopted a common technique
used in industry and the federal government to

develop technology strategies: technology road-mapping.
In a traditional technology roadmap, one uses expert
panels to begin with an assessment of needs, then
constructs a map of existing resources, performs an
analysis to determine the gap between what currently
exists and what is needed, and finally develops a plan
or roadmap of possible routes from here to there, from
now to the future. Although sometimes confused with
jargon such as environmental scans, resource maps,
and gap analysis, in reality the roadmapping process
is quite simple. It begins by asking where we are today,
then where we wish to be tomorrow, followed by an
assessment of how far we have to go, and finally concludes
by developing a roadmap to get from here to
there. The roadmap itself usually consists of a series of
recommendations, sometimes divided into those that
can be accomplished in the near term and those that
will require longer-term and sustained effort.
To provide context, we begin in Chapter 2 with an
environmental scan of realities of the flat playing field of
the global knowledge economy, where robust telecommunications
connectivity has enabled billions of new
knowledge workers to compete for jobs and prosperity,
regardless of location or nationality, provided they have
developed the skills and infrastructure. Although most
of our analysis concerns the near- term challenges and
opportunities of the knowledge economy, we include
some brief speculation on possible trends and surprises
for the longer term.
In Chapter 3 we turn to a discussion of Michigan
today. Our state is having great difficulty in making the
transition from a manufacturing to a knowledge economy.
In recent years we have led the nation in unemployment;
the out-migration of young people in search
of better jobs is the fourth most severe among the
states; our educational system is underachieving with
one quarter of Michigan adults without a high school
diploma and only one third of high school graduates
college-ready. We review both our state’s knowledge
assets and liabilities. While Michigan still has, at least
for the moment, a high-quality system of colleges and
universities, including two of the nation’s leading research
universities, the erosion of state support over the
past two decades and most seriously over the past four
years has not only driven up tuition but put the quality
and capacity of our public universities at great risk.
Primary and secondary education is of equal concern,
not so much because of funding, which has been locked
into state budgets by a constitutional amendment in the
1990s, but rather because of poor achievement, particularly
in the preparation of students for higher education.
Next in Chapter 4 we turn to a vision for Michigan
tomorrow, a knowledge society, serving the needs of all
of our citizens, characterized by world-class innovation
and a strategic utilization of the very technology that
is reshaping our world. Put another way, we suggest
those skills, knowledge resources, and educational opportunities
needed by both 21st-century citizens and by
a 21st-century workforce. In Chapter 5, by comparing
this vision with the current reality, we can determine
how far Michigan must travel to reach a prosperous future.
We can also identify the resource gap that exists
between what we have now and what we will need for
the future, between the obsolete institutions, policies
and programs of today and the globally competitive resources
Michigan must build for tomorrow.
Finally, in Chapter 6 we conclude with the development
of the Michigan Roadmap itself, a series of nearterm
and long-term recommendations designed to
move our state toward this future. In a knowledge-intensive
society, regional advantage is achieved by creating
a highly educated and skilled workforce. It requires
an environment that stimulates creativity, innovation,
and entrepreneurial behavior. Experience elsewhere
has shown that visionary public policies and significant
public investment are necessary to produce new
knowledge, human capital, and infrastructure to support
a knowledge economy. Hence in the near term our
principal recommendations focus on changing policies
for investing in higher education, research, and innovation,
while providing our institutions with the capacity
to become more agile and market-smart. For the longer
term, our roadmap proposes a vision of the future in
which Michigan strives to build a knowledge society
capable of adapting and evolving to meet the imperatives
of a global, knowledge-driven world.
Several Caveats
There are numerous examples of similar planning
efforts that have had remarkable impact. Perhaps the

most famous American example was the California
Master Plan, developed in the 1950s and adopted in
1960 to provide a world-class educational system for
a state facing profound economic and demographic
change. Ireland’s entry into the European Union was
accompanied by an aggressive plan to ramp up major
investments in advanced education and stimulate an
entrepreneurial culture that has transformed a nation
with a backward economy into the Celtic Tiger, now
one of the most prosperous nations in Europe. Yet another
example is provided by Finland, a nation with relatively
limited natural resources, which has used strong
investments in technology and education to leapfrog
into perhaps the most high-tech economy in the world.
Today we see the massive populations of India and China
determined to make similar investments to become
global economic powers in a knowledge economy.
This report, which has a similar objective for our
state, is aimed at several audiences. To be sure, it is intended
for leaders in the public sector (the Governor,
Legislature, and other public officials), the business
community (CEOs, labor leaders), higher-education
leaders, and the nonprofit foundation sector. However,
this report is also written for those interested and concerned
citizens who have become frustrated with the
deafening silence about Michigan’s future that characterizes
our public, private, and education sectors. It is
difficult to address issues such as developing a tax system
for a 21st-century economy, building world-class
schools and colleges, or making the necessary investments
for future generations in the face of the determination
of the body politic and its political leaders to
cling tenaciously to past beliefs and practices. Yet the
realities of a flat world will no longer tolerate procrastination
or benign neglect (Friedman, 2005). For this
effort to have value, we believe it essential to explore
openly and honestly where our state is today, where it
must head for tomorrow, and what actions will be necessary
to get there.
This report is also written for a broader audience of
those interested in how one might analyze the challenges
and opportunities of a region (state or nation), stimulated
by and perhaps addressed by technology, through
a roadmapping effort to develop both a vision of the future
and possible paths toward that vision. While much
of the detail of the report is Michigan-specific, the general
approach, the issues that arise, and many of the recommendations
have broader validity and relevance.
It is important to acknowledge that while there are
many components to transforming Michigan into a
knowledge economy–tax policy, providing adequate social
services, government restructuring, and, of course,
political transformation–this report focuses particular
attention on the role played by knowledge institutions
such as universities, corporate R&D, and entrepreneurs.
To be sure, these are the institutions most closely associated
with the author’s background–as a scientist, an
engineer, and a university leader. But it also reflects the
author’s growing concerns about the challenges posed
both to our state and nation, gained through leadership
experience in national science and technology policy
(e.g., chair of the National Science Board) and numerous
assignments as chair of various National Academy
of Sciences and Engineering task forces concerned with
economic competitiveness and national security.
While some may question the particular attention
given to the importance of Michigan’s flagship research
universities in the state’s future, here one need only
refer to a quote from Congressional testimony by Erich
Bloch while director of the National Science Foundation
(Bloch, 1988): “The solution of virtually all the
problems with which government is concerned: health,
education, environment, energy, urban development,
international relationships, space, economic competitiveness,
and defense and national security, all depend
on creating new knowledge and hence upon the health
of America’s research universities.” Nothing could be
more important for the leaders and citizens of Michigan
to bear in mind as they contemplate the future of our
state.

Chapter 2
Setting the Context: An Environmental Scan
We live in a time of great change, in a global society
bound together by pervasive communications and
transportation technologies and driven by the exponential
growth of new knowledge. It is a time of challenge
and contradiction, as an ever-increasing human
population threatens global sustainability; a global,
knowledge-driven economy places a new premium on
workforce skills through phenomena such as outsourcing
and off-shoring; governments place increasing
confidence in market forces to reflect public priorities
even as new paradigms such as open-source software
challenges conventional free-market philosophies; and
shifting geopolitical tensions driven by the great disparity
in wealth and power about the globe, national
security, and terrorism.
As Tom Friedman stresses in his provocative book,
The World is Flat, information and telecommunications
technologies have created a platform “where intellectual
work and intellectual capital can be delivered
from anywhere–disaggregated, delivered, distributed,
produced, and put back together again–in current business
terms “global sourcing”–and this gives an entirely
new freedom to the way we do work, especially work
of an intellectual nature. Put another way, “The playing
field is being leveled. Countries like India and China
are now able to compete for global knowledge work
as never before. And America […and Michigan…] had
better get ready for it” (Friedman, 2005). Today rapidly
evolving technologies and sophisticated supply chain
management are allowing global sourcing, the ability
to outsource not only traditional activities such as
low-skill manufacturing, but to off shore essentially
any form of knowledge work, no matter how sophisticated,
to whatever part of the globe has populations
most capable and cost-effective to perform it. The impact
of the flat world on Michigan has been disruptive,
if not catastrophic, in many respects. Yet we have only
experienced the first waves of the approaching global
sourcing tsunami.
In the 20th century a few large companies–indeed,
one mammoth industry–determined Michigan’s destiny.
Economic growth and prosperity were taken for
granted. There was little call for entrepreneurship.
The focus of government was on expanding services,
regulation, and entitlements, and enacting the taxation
to pay for it all, while protecting Michigan industry
from federal regulators. Today we find Michigan midway
through a several-decades-long transition from a
state dominated by a single industry and a few large
companies to one with thousands of small, dynamic
companies competing in a global marketplace. We
are experiencing a transition from low-skill, high-pay
jobs to high-skill, high-pay jobs (or, tragically, low-skill,
low-pay jobs and unemployment); from a transportation-industry
state to a knowledge-services state; from
the industrial age to an age of knowledge in a global
economy.
While many Michigan citizens understand that automobile
production no longer dominates our state’s
economy the way it once did, there are still voices suggesting
that a robust manufacturing economy based on
factory jobs remains the path to prosperity. To be sure,
in the face of intense competition from Japan during
the 1980s, Michigan companies did learn to streamline
operations and cut costs, thereby becoming more
competitive, albeit with some erosion in market share.
However over the long term, such actions did not retain
existing jobs, let alone create new ones, since productivity
gains are linked to downsizing through efforts such
as total quality management, shorter cycle times, and
just-in-time inventory. In fact, increased productivity,
coupled with the shift of manufacturing jobs to lower
cost states and nations, have led to a major decline in
low skill, high wage factory jobs in Michigan. Hence
at best restructuring to enhance productivity can only
preserve some existing jobs for a short time, although
it can provide a valuable opportunity to restructure an
industry for the new economy. Yet such has apparently

not happened in our state.
Although the median family income in Michigan
began to rise again in the 1990s after two decades of
decline, it lagged behind most other states. Michigan’s
economic growth during this period was among the
lowest in the nation. More recently, Glazer and Grimes
have noted that over the past three years Michigan has
lost 163,000 manufacturing jobs, with the remaining
700,000 manufacturing jobs in this sector at considerable
risk from further outsourcing (not to mention offshoring
of high-tech services), even though the nation’s
three largest automotive companies remain headquartered
in our state (Glazer, 2004).
Though Michigan added 450,000 jobs during the period
from 1990 to 2003, the state lagged considerably
behind the national average, growing both overall employment
and per capita income only two-thirds as fast
as the nation. Of more concern is the fact that employment
in knowledge-intensive industries in Michigan
grew only 16% during this period, compared to 26% nationally.
When one recognizes that today less than 11%
of our nation’s jobs are in manufacturing, compared
with 19% in knowledge-based industries, it is apparent
that manufacturing is no longer a reliable path to prosperity
in a global, knowledge-driven economy.
Paul Dimond states it well when he portrays Michigan
as as the frog in a slowly heated pot, insensitive
to the increasing temperature until it is finally boiled.
Michigan’s older manufacturing firms have been losing
market share, its high-value added service sector
is growing more slowly, and the state simply does not
enjoy an innovation infrastructure or an entrepreneurial
culture. Indeed, Michigan’s strong union presence,
twice the national average at 20%, not only drives
higher manufacturing costs but has created an entitlement
culture. With the possible exception of Ann Arbor,
Michigan has no region viewed as a major R&D center
or seedbed for generating high-value added service
jobs. (Dimond, 2005).
So what is next What is the next economic engine
for Michigan It seems increasingly clear that new jobs
in Michigan are not going to be spawned by existing
industry but instead will be created by entirely new
activities, e.g., biotechnology, information technology,
global financial services, and other knowledge-intensive
industries that will require new knowledge, new
entrepreneurs, and new knowledge workers. In a global,
knowledge-driven economy, Michigan’s challenge is
to build a world-class workforce, generate the innovative
ideas, and apply them with entrepreneurial skill
to create the new companies that will drive economic
growth and competitiveness. The challenge is to enter
into and be competitive in a global economy based on
knowledge.
Challenge One: The Knowledge Economy
Looking back over history, one can identify certain
abrupt changes, discontinuities, in the nature of our
civilization. Clearly we live in just such a time of very
rapid and profound social transformation, a transition
from a century in which the dominant human activity
was transportation to one in which communications
has become paramount, from economies based upon
cars, planes, and trains to one dependent upon computers
and networks. We are shifting from an emphasis
on creating and transporting physical objects such as
materials and energy to knowledge itself; from atoms
to bits; from societies based upon the geopolitics of the
nation-state to those based on diverse cultures and local
traditions; and from a dependence on government
policy to an increasing confidence in the marketplace to
establish public priorities.
Today we are evolving rapidly into a post-industrial,
knowledge-based society, a shift in culture and technology
as profound as the shift that took place a century
ago when our agrarian societies evolved into industrial
nations (Drucker, 1999). Industrial production is steadily
shifting from material- and labor-intensive products
and processes to knowledge-intensive products and
services. A radically new system for creating wealth
has evolved that depends upon the creation and application
of new knowledge and hence upon educated
people and their ideas and institutions such as research
universities, corporate R&D laboratories, and national
research agencies where advanced education, research,
innovation, and entrepreneurial energy are found.
In recent testimony to Congress, Nicholas Donofrio,
senior executive of IBM, described today’s global
knowledge economy as driven by three historic developments:
“the growth of the Internet as the planet’s operational
infrastructure; the adoption of open technical

Enterprise Systems
R&D Outsourcing
Global, Knowledge-Driven Economy
Products, Systems, Services
Vertical Integration
Horizontal Integration
Political Influence
Public Relations
Customer Relations
Management
Sales
Manufacturing
Product Development
Suppliers
Bus Proc Outsourcing
Innovation Off-shoring
Social
Sciences
Liberal
Arts
Professions
R&D
Business, Public Policy
International Relations
Micro-sciences
(Info-bio-nano)
Macro-sciences
(Complex systems)
Applied sciences
Eng, Med, Ag, Arch
NEW KNOWLEDGE
(R&D, Innovation)
HUMAN CAPITAL
(Lifelong learning)
INFRASTRUCTURE
(higher ed, labs, cyber)
POLICIES
(R&D, tax, IP)
The Brave, New World of the Global, Knowledge-Driven Economy
standards that facilitate the production, distribution,
and management of new and better products and services;
and the widespread application of these to the
solution of ubiquitous business problems. In this increasingly
networked world, the choice for companies
and governments is between innovation and commoditization.
Winners can be innovators–those with the capacity
to invent, manage, and leverage intellectual capital–or
commodity players, who differentiate through
low price economics of scale and efficient distribution
of someone else’s intellectual capital” (Donofrio, 2005).
Put another way, should Michigan emulate California
or instead China That is the choice before us!
In a very real sense, we are entering a new age, an
age of knowledge, in which the key strategic resource
necessary for prosperity has become knowledge itself—educated
people and their ideas (Bloch, 1988).
Unlike natural resources, such as iron and oil, that have
driven earlier economic transformations, knowledge is
inexhaustible. The more it is used, the more it multiplies
and expands. But knowledge can be created, absorbed,
and applied only by the educated mind. Hence
schools in general, and universities in particular, will
play increasingly important roles as our societies enter
this new age. The knowledge economy is demanding
new types of learners and creators. Globalization requires
thoughtful, interdependent and globally identified
citizens. New technologies are changing modes
of learning, collaboration and expression. And widespread
social and political unrest compels educational
institutions to think more concertedly about their role
in promoting individual and civic development.
Nations are investing heavily and restructuring
their economies to create high-skill, high-pay jobs in
knowledge-intensive areas such as new technologies,
financial services, trade, and professional and technical
services. From Paris to San Diego, Bangalore to
Shanghai, there is a growing recognition throughout
the world that economic prosperity and social wellbeing
in a global knowledge-driven economy requires
public investment in knowledge resources. That is, regions
must create and sustain a highly educated and
innovative workforce and the capacity to generate and
apply new knowledge, supported through policies and
investments in developing human capital, technological
innovation, and entrepreneurial skill. Nations both

10
small and large, from Finland to China, are beginning
to reap the benefits of such investments aimed at stimulating
and exploiting technological innovation, creating
serious competitive challenges to American industry
and business both in the conventional marketplace
(e.g., Toyota) and through new paradigms such as the
off-shoring of knowledge-intensive services (e.g., Bangalore).
And it is this reality of a hyper-competitive, global,
knowledge-driven economy of the 21st Century that is
stimulating the powerful forces that will reshape the
nature of our society and our knowledge institutions.
Challenge Two: Globalization
Whether through travel and communication, the arts
and culture, or the internationalization of commerce,
capital, and labor, both our nation and our state are becoming
increasingly linked with the global community.
The world and our place in it have changed–with globalization
determining not only regional prosperity but
also national and homeland security. A truly domestic
United States economy has ceased to exist. It is no longer
relevant to speak of the health of regional economies
or the competitiveness of American industry, because
we are no longer self-sufficient or self-sustaining. Our
economy and many of our companies are international,
spanning the globe and interdependent with other nations
and other peoples. Worldwide communication
networks have created an international market, not
only for conventional products, but also for knowledge
professionals, research, and educational services.
As the recent report of the National Intelligence
Council’s 2020 Project has concluded, “The very magnitude
and speed of change resulting from a globalizing
world–apart from its precise character–will be a
defining feature of the world out to 2020. During this
period, China’s GNP will exceed that of all other Western
economic powers except for the United States, with
a projected population of over 1.4 billion. India and
Brazil will also likely surpass most of the European
nations. Globalization–growing interconnectedness reflected
in the expanded flows of information, technology,
capital, goods, services, and people throughout the
world–will become an overarching mega-trend, a force
so ubiquitous that it will substantially shape all other
major trends in the world of 2020” (National Intelligence
Council, 2004).
As Friedman notes, some three billion people who
were excluded from the pre-Internet economy have now
walked out onto a level playing field, from China, India,
Russia, Eastern Europe, Latin American, and Central
Asia. “It is this convergence of new players, on a new
playing field, developing new processes for horizontal
collaboration, that I believe is the most important force
shaping global economics and politics in the early 21 st
century.” Or as Craig Barrett, CEO of Intel, puts it: “You
don’t bring three billion people into the world economy
overnight without huge consequences, especially from
three societies like India, China, and Russia, with rich
educational heritages” (Friedman, 2005).
In such a global economy, it is critical that states not
only have global reach into markets abroad, but also
have the capacity to harvest new ideas and innovation
and to attract talent from around the world. Interestingly
enough, perhaps the best way to do this is to invest in
flagship research universities, since these are truly international
institutions. They reflect a strong international
character among their students, faculty, and academic
programs. These institutions also stand at the center of
a world system of learning and scholarship. They are
the magnets regions can use to attract new talent, new
industry, and new resources from around the world.
Challenge Three: Demographics
America’s population is changing rapidly today.
One of the most significant demographic trends is that
our population is getting older; the baby boomers are
approaching retirement, and the number of young
adults is declining. In the United States, there are already
more people over the age of sixty-five than teenagers
in this nation, and this situation will continue for
decades to come. In our lifetime the United States will
not again be a nation of youth, in sharp contrast to the
developing nations in Asia, Africa, and Latin America,
where the average age is less than 20.
A second and equally profound demographic
change is that the U.S. is rapidly becoming one of the
most pluralistic, multicultural nations on earth. Those
groups we refer to today as “minorities” will become
the majority population of our nation in the century

11
ahead, just as they are today throughout the world
and in an increasing number of states, including California,
Texas, New Mexico, and Hawaii (and soon Arizona,
New York, and Georgia). In this future, the full
participation of currently underrepresented minorities
will be of increasing concern as we strive to realize our
commitment to equity and social justice. The achievement
of this objective also will be the key to the future
strength and prosperity of America, since our nation
cannot afford to waste the human talent presented by
its minority populations.
The increasing diversity of the American population
with respect to race, ethnicity, gender and nationality is
both one of our greatest strengths and most serious challenges
as a nation. A diverse population gives us great
vitality. However the challenge of increasing diversity
is complicated by social and economic factors. Far from
evolving toward one America, our society continues to
be hindered by the segregation and non-assimilation of
minority cultures. Many among us are challenging in
both the courts and through referendum long-accepted
programs such as affirmative action and equal opportunity
aimed at expanding access to higher education
to underrepresented communities and diversifying our
campuses and workplaces (The Economist, 2005). If we
do not create a nation that mobilizes the talents of all of
our citizens, we are destined for a diminished role in
the global community and increased social turbulence.
Most tragically, we will have failed to fulfill the promise
of democracy upon which this nation was founded.
Challenge Four: Exponentiating Technologies
The new technologies driving such profound changes
in our world–technologies such as information technology,
biotechnology, and soon nanotechnology–are
characterized by exponential growth. When applied to
microprocessor chips, this remarkable property, known
as Moore’s Law, implies that every 18 months computing
power for a given price doubles. And for other elements
of digital technology, such as memory and bandwidth,
the doubling time is only 9 to 12 months. Scientists
and engineers today believe that the exponential
evolution of these microscopic technologies is not only
likely to continue for the conceivable future, but in fact,
the pace may be accelerating.
Put another way, digital technology is characterized
by an exponential pace of evolution in which characteristics
such as computing speed, memory, and network
transmission speeds for a given price increase by a factor
of 100 to 1000 every decade. Over the next decade,
we will evolve from “giga” technology (in terms of computer
operations per second, storage, or data transmission
rates) to “tera” and then to “peta” technology (one
million-billion or 10 15 ). To illustrate with an extreme example,
if information technology continues to evolve at
its present rate, by the year 2020, the thousand-dollar
notebook computer will have a data processing speed
and memory capacity roughly comparable to the human
brain (Kurzweil, 1999). Furthermore, it will be so
tiny as to be almost invisible, and it will communicate
with billions of other computers through wireless technology.
For planning purposes, we can assume that by the
end of the decade we will have available infinite bandwidth
and infinite processing power (at least compared
to current capabilities). We will denominate the number
of computer servers in the billions, digital sensors in the
tens of billions, and software agents in the trillions. The
number of people linked together by digital technology
will grow from millions to billions. We will evolve from
“e-commerce” and “e-government” and “e-learning” to
“e-everything,” since digital devices will increasingly
become predominant interfaces not only with our environment
but with other people, groups, and social
institutions.
Beyond acknowledging the extraordinary and unrelenting
pace of evolution of this technology, it is equally
important to recognize that it is disruptive in nature.
The impact on social institutions such as corporations,
governments, and learning institutions is profound,
rapid, and quite unpredictable. As Clayton Christensen
explains in The Innovator’s Dilemma, while many of
these new technologies are at first inadequate to displace
today’s technology in existing applications, they
later will explosively displace the application as they
enable a new way of satisfying the underlying need
(Christensen, 1997). If change is gradual, there will be
time to adapt gracefully, but that is not the history of
disruptive technologies. Hence organizations (including
states) must work to anticipate these forces, develop
appropriate strategies, and make adequate investments

12
if they are to prosper–indeed, survive–such a period.
Procrastination and inaction (not to mention ignorance
and denial) are the most dangerous of all courses during
a time of rapid technological change.
The Implications
Education for the New Economy
Today in a global, knowledge-driven economy, a college
degree has become a necessity for most careers, and
graduate education desirable for an increasing number.
The pay gap between high school and college graduates
continues to widen, doubling from a 50% premium in
1980 to 111% today (Moe, 2000). Not so well known is an
even larger earnings gap between baccalaureate-degree
holders and those with graduate degrees. This should
not be surprising in view of the fact that in the knowledge
economy, the key asset driving corporate value is
no longer physical capital or unskilled labor. Instead
it is intellectual and human capital. In fact, there is an
even more pragmatic way to look at the importance of
advanced education. Today we invest about $100,000
of public funds to produce a high school graduate (K-
12). Yet statistics indicate that the careers available to
those with only a high school diploma will never repay
in state and local taxes the cost of their education. It is
only at the bachelor’s-degree level and above that the
public can expect to regain its investment in education
from tax revenues (Wiley, 2003).
Although a growing population will necessitate
growth in higher education to accommodate the projected
increases in traditional college-age students, even
more significant will be the growing demand of working
adults, who increasingly realize that in the highperformance
workplace, without further education
they are only one paycheck away from the unemployment
line. In fact, it is estimated that by 2010 more than
50% of college students will be working adults over the
age of 25. We are shifting from “just-in-case” education,
based on degree-based programs early in one’s life, to
“just-in-time” education, where knowledge and skills
are obtained during a career, to “just-for-you” educational
services, customized to the needs of the student.
The student is evolving into an active learner and eventually
a demanding consumer of educational services.
In fact, one of the most important lessons of the new
knowledge economy is that one has to constantly upgrade
one’s skills to compete. To be sure, there will be
plenty of good jobs for those with the knowledge and
ideas to seize them. At least as long as one’s knowledge
and skills are continuously improved through lifelong
learning.
There is another important point here: Politicians
usually rationalize the current phenomenon of offshoring,
the increasing trend for companies to export
knowledge-intensive service jobs like engineering and
information services to developing nations like India,
China, and Eastern Europe, by suggesting that it is the
low wage rates that shift jobs overseas (typically 20
cents on the dollar in India, for example). But increasingly
companies are doing this because they get higher
quality service in high-tech areas like computer software
development. Why Because many of these nations
are making massive investments in higher education,
particularly in technology-intensive areas like engineering
and computer science to create a more highly
skilled workforce, at a time when our nation and state
have been throttling back such investments.
India was lucky, in a way, since it was already well
positioned by major investments two decades ago to
build a chain of Indian Institutes of Technology–their
version of MIT–that now produce the talented scientists,
engineers, and managers that fuel their rapidly
evolving knowledge economy. China’s leaders, while
starting only a decade ago, are just as determined and
even more focused to train young people in the science
and technology skills necessary to produce world-class

13
scientists and engineers. Perhaps because most Chinese
leaders have backgrounds in these disciplines themselves
(unlike American leaders, with law and business
backgrounds most prominent), they also place a far
higher priority on building world-class research universities
(Friedman, 2005).
Today Asia currently is producing three times as
many scientists and engineers as the United States. Yet
the number of jobs requiring technical training is growing
five times as fast as other occupations in our nation,
even while the average age of American scientists
and engineers is approaching retirement, the number of
new entrants into science and engineering programs is
falling, and the public perception of these fields as exciting,
important, and financially rewarding is declining.
In the United States eroding student interest in science
and mathematics and the weakness of K-12 education
has led to a situation in which engineering students
comprise less than 5% of U.S. college graduates, compared
to 12% in Europe and over 50% in some Asian
countries. The United States has traditionally been able
to compensate for this domestic shortfall by using its
high quality universities to attract talented students in
science and engineering from other countries. However
in the wake of 9-11, a tightening of immigration policies
coupled with the increasing efforts of other nations to
compete for foreign university students had threatened
this supply (Duderstadt, 2005).
There are other implications of the global knowledge
economy for education. Unlike the linear, vertical
process for value creation characteristic of 20 th -century
industry–from R&D to product design to manufacturing
to sales to distribution–today’s global supply chain
depends on a horizontal process, in which each activity
is globally sourced to wherever it can be performed at
highest quality and acceptable costs, and then integrated
back together again to produce products, services, and
values. You can now source the best product or service
or capacity or competency from anywhere in the world
today because of the new knowledge infrastructure
(Friedman, 2005). Such global sourcing changes quite
dramatically the skills and knowledge required of those
who are to function effectively in this new economy.
Little wonder that higher education is becoming a
powerful political force, at least in rhetoric if not yet in
actual public investment. Ask any governor about state
priorities these days and you are likely to hear concerns
expressed about education and workforce training.
The National Governors Association stresses that
“The driving force behind the 21st Century economy is
knowledge, and developing human capital is the best
way to ensure prosperity.” Some governors are even
taking the courageous step of proposing tax increases
to fund new investments in higher education, research,
and innovation.
The Importance of Technological Innovation
The National Intelligence Council’s 2020 Project
concludes, “the greatest benefits of globalization will
accrue to countries and groups that can access and
adopt new technologies. Indeed, a nation’s level of
technological achievement generally will be defined in
terms of its investment in integrating and applying the
new, globally available technologies–whether the technologies
are acquired through a country’s own basic
research or from technology leaders” (National Intelligence
Council, 2004). This study notes that China and
India are well positioned to become technology leaders,
and even the poorest countries will be able to leverage
prolific, cheap technologies to fuel–although at a slower
rate–their own development. It also warns that this
transition will not be painless and will hit the middle
classes of the developed world in particular, bringing
more rapid job turnover and requiring professional
retooling. Moreover, future technology trends will be
marked not only by accelerating advancements in individual
technologies but also by a force-multiplying
convergence of the technologies–information, biological,
materials, and nanotechnologies–that have the potential
to revolutionize all dimensions of life.
In summary, the 2020 Project stresses that “A nation’s
or region’s level of technological achievement generally
will be defined in terms of its investment in integrating
and applying the new globally available technologies–whether
the technologies are acquired through a
country’s own basic research or from technology leaders.
Nations that remain behind in adopting technologies
are likely to be those that have failed to pursue policies
that support application of new technologies–such
as good governance, universal education, and market
reforms–and not solely because they are poor.”

14
This has been reinforced by a recent study by the
National Academy of Engineering that concludes,
“American success has been based on the creativity, ingenuity,
and courage of innovators, and innovation that
will continue to be critical to American success in the
twenty-first century. As a world superpower with the
largest and richest market, the United States has consistently
set the standard for technological advances, both
creating innovations and absorbing innovations created
elsewhere” (Duderstadt, 2005).
Many nations are investing heavily in the foundations
of modern innovation systems, including research
facilities and infrastructure and a strong technical
workforce. Unfortunately, neither the United States
in general, nor Michigan in particular, has given such
investments the priority they deserve in recent years–
a subject we will return to consider in more detail in
Chapter 5.
The changing nature of the international economy,
characterized by intense competition coexisting with
broad-based collaboration and global supply chains
and manifested in unprecedented U.S. trade deficits,
underscores long-standing weaknesses in the nation’s
and our state’s investment in the key ingredients of
technological innovation: new knowledge (research),
human capital (education), and infrastructure (educational
institutions, laboratories, cyberinfrastructure).
Well-documented and disturbing trends include:
skewing of the nation’s research priorities away from
engineering and physical sciences and toward the life
sciences; erosion of the engineering research infrastructure;
a relative decline in the interest and aptitude of
American students for pursuing education and training
in engineering and other technical fields; and growing
uncertainty about our ability to attract and retain gifted
science and engineering students from abroad at a time
when foreign nationals constitute a large and productive
fraction of the U.S. R&D workforce.
Shifting Public Priorities
Foremost on the minds of most university leaders
these days are the devastating cuts in appropriations as
the states struggle to cope with crushing budget deficits
or the erosion of private support from gifts and endow-ment
income associated with a weak economy. Of
course, the optimist might suggest that this is just part
of the ebb and flow of economic cycles. In bad times,
state governments and donors cut support, hoping to
restore it once again in good times. But this time it may
be different. As one state budget officer noted: “College
leaders are fooling themselves if they think the end of
this recession will be like all the others. What we’re seeing
is a systematic, careless withdrawal of concern and
support for advanced education in this country at exactly
the wrong time.” (Selengo, 2003).
Why the doom and gloom In Europe and Asia, the
erosion of public support is seen as a consequence of
massification of higher education, in which tax revenues
once supporting only university education for
the elite are now being stretched beyond capacity to
fund higher education for an appreciable fraction of the
population. In the United States, as mentioned previously,
our current dilemma is somewhat different. As a
nation that once viewed education as critical to national
security, we seem more concerned with sustaining the
social benefits (and tax policies) demanded by an aging
baby boomer population, a situation unlikely to change
for several decades.
This idea is particularly important for the leaders
of America’s public universities. Today in the face of
limited resources and more pressing social priorities,
the century-long expansion of public support of higher
education has slowed. While the needs of our society
for advanced education can only intensify as we evolve
into a knowledge-driven world culture, it is not evident
that these needs will be met by further growth of our
existing system of public universities. We now have at
least two decades of experience that would suggest that
the states are simply not able—or willing—to provide
the resources to sustain growth in public higher education,
at least at the rate experienced in the decades
following World War II. In many parts of the nation,
public universities will be hard pressed even to sustain
their present level of state support.
The Importance of the Marketplace
These economic, social, and technological factors
are stimulating powerful market forces that are likely
to drive a massive restructuring of the higher education
enterprise, similar to that experienced by other

15
economic sectors such as health care, transportation,
communications, and energy. We are moving toward a
revenue-driven, market-responsive education system
because there is no way that our current tax systems
can support the level of advanced education required
by knowledge-driven economies, in the face of other
compelling social priorities (particularly the needs of
the aging). This is amplified by an accelerating influence
of the market on higher education and a growing
willingness on the part of political leaders to use market
forces as a means of restructuring higher education
in order to increase the impact of the competition. Put
another way, market forces are rapidly overwhelming
public policy and public investment in determining the
future course of higher education.
Of course, higher education in the United States has
always viewed itself as competitive, particularly compared
to elsewhere in the world. In reality, however,
the competition has been muted, more benign than
ferocious, more focused on prestige than on quality or
price. It has been restrained both by tradition and by
government regulation. States have operated what are
basically higher-education cartels of public institutions,
each institution assigned specific roles, with regulations
that govern price, funding, enrollment, operation,
and the scope of programs. Yet today, in state after
state–indeed, in nation after nation–governments are
abandoning centralized planning and control of higher
education and instead stimulating market competition,
believing that market forces are far more effective in
controlling costs and mission creep while demanding
efficiency and quality. University leaders are demanding
greater autonomy in order to compete and survive
in the face of increasing market pressures (Newman,
2004).
This interest in market forces on the part of government
does not come out of the blue, but rather is
a further extension of a broader push toward the use
of markets for a wide array of sectors, recognizing that
in today’s society, the marketplace may be a far more
faithful reflection and arbiter of public needs than public
policy and politicians. Legislators have grown impatient,
and “accountability” has become a hot-button
topic. As a result, many states are now seeking to transform
their statewide systems of higher education into
competitive markets, encouraging competition rather
than coordination.
Needless to say, there are some holdouts. After all,
it is difficult for legislators to step back and encourage
university autonomy and agility. The temptation to
regulate is deep seated and pervasive. But the market
forces driving the evolution of higher education are intensifying
and will almost certainly sweep aside institutions
unable to achieve the autonomy and agility so
necessary to compete.
Public higher education is grappling with what is
referred to as the “autonomy-accountability” tradeoff
(Newman, 2004). Academic and political leaders are
seeking to craft policies that provide the opportunity
and the incentive for institutions to become more autonomous
and entrepreneurial while holding insti-tutions
more accountable for performance. What state
leaders need, and what would serve the public most
effectively, is state control principally of two factors:
mission and a range of workable means of assessing
institution performance. What university leaders need
is greater autonomy in operation of the institution in
order to fulfill the agreed-upon mission.
Ironically, the current budget crisis has provided
the opportunity for such negotiations in many states,
and a new breed of public institutions is appearing
with names such as “charter universities,” “enterprise
universities,” “state-related universities,” or “public
corporations or authorities.” Despite the widespread
confusion about terminology, one thing seems clear: institutions,
states, and nations are searching for ways of
injecting more autonomy into the system after decades
of building regulations. Discussions about changing
the regulatory structure of higher-education systems
are, ultimately, political discussions. The tradeoff between
autonomy and accountability should leave all
parties feeling that they get something out of the deal.
Academic leaders get autonomy, and political leaders
gain leverage for reinforcing public needs. Most importantly,
this new relationship creates the conditions
for a higher- education system that is flexible, entrepreneurial,
customized, accountable, and able to meet the
state’s needs (Newman, 2004).
Tomorrow’s Horizon
Attempting to predict the future is always a hazard-

16
ous activity. We generally overestimate change in the
near term and underestimate it for the longer term, in
part because we usually tend to extrapolate what we
know today into a future that becomes increasingly beyond
our imagination. It is very difficult to peer over
the horizon. But there are some trends apparent today
that will almost certainly influence the longer term.
The End of Oil
Michigan’s economy–indeed, the United States
economy–is based upon the availability of cheap energy.
More specifically, our current transportation industry
is heavily dependent on the availability of petroleum,
over 60% of which is imported, predominantly
from unstable regions such as the Middle East. Despite
the increasing uncertainty of foreign markets, there has
been relatively little effort in the United States to reduce
dependence on foreign oil, as evidenced by the strong
resistance of American automobile manufacturers to
fuel-efficient designs. Yet the instabilities in oil pricing
during summer of 2005, in which oil prices broke
through the $70 per barrel level, and gasoline prices exceeded
$3 per gallon at the pump in many regions, suggest
the possibility of something more devastating: the
peaking of global petroleum production(Maass, 2005).
In the 1970s, a petroleum geologist, M. King Hubbert,
predicted that domestic U.S. oil production would
peak in the late 1970s, leading to an imbalance between
diminishing supply and growing demand that would
lead to a major and permanent increase in foreign oil
imports. (Goodstein, 2004). His prediction was right on
target. Although the party line of big oil has been that
global production would not peak until mid-century
with new technology and unexplored reserves, more
recent estimates have suggested that global oil production
could peak within the next decade (with gas
production peaking roughly a decade later). The consequence
of passing over the global Hubbert peak is not
the disappearance of oil; roughly half of the reserves
would remain. Rather it would be a permanent imbalance
between supply and demand that would drive oil
prices through the roof–$100/bbl, $200/bbl, and beyond–with
corresponding increases at the pump. The
rapidly increasing oil and gas demands from developing
economies such as China, India, and Latin America
make this imbalance even more serious, particularly
when it is noted that the United States currently consumes
25% of world production.
Note here that the end of the oil era does not begin
when the last drop of oil is consumed, but rather when
oil producers are unable to continue increasing output
to meet rising demand (Maass, 2005). At this point, supply-
and demand-economics takes over, and oil prices
spike into the stratosphere. A recent assessment by the
U. S. Department of Energy in spring of 2005 warned,
“The world has never faced a problem like this. Without
massive mitigation more than a decade before the
fact, the problem will be pervasive and will not be temporary.
Previous energy transitions (wood to coal and
coal to oil) were gradual and evolutionary; oil peaking
will be abrupt and revolutionary” (Hirsch, 2005).
Beyond the fact that the impact of reaching the Hubbert
peak in global oil production during the next decade
or so would be traumatic to the United States economy,
it would also very likely obliterate what remains
of the American automobile industry. It is unlikely that
our domestic companies would be able to shift rapidly
enough to produce the small, fuel-efficient cars long
dominated by Asian companies or adept enough to
exploit hybrid, electric, or hydrogen fuel technologies.
Needless to say, the consequences for Michigan would
be serious indeed.
Global Sustainability
There is compelling evidence that the growing
population and the invasive activities of humankind
are now altering the fragile balance of our planet. The
concerns are both multiplying in number and intensifying
in severity: the destruction of forests, wetlands, and
other natural habitats by human activities leading to the
extinction of millions of biological species and the loss
of biodiversity; the buildup of greenhouse gases such
as carbon dioxide and their possible impact on global
climates; the pollution of our air, water, and land. It
could well be that coming to grips with the impact of
our species on our planet, learning to live in a sustainable
fashion on Spaceship Earth, will become the greatest
challenge of all to our generation. We must find new
ways to provide for a human society that presently has
outstripped the limits of global sustainability.

17
This will be particularly difficult for the United
States, a nation that has difficulty in looking more than
a generation ahead, encumbered by a political process
that generally functions on an election-by-election basis,
as the current debate over global climate change
makes all too apparent. There is little doubt among most
scientists that the mean temperature of the earth is indeed
rising, and that human activities are the dominant
cause, despite the efforts of some politicians to portray
this as a left-wing conspiracy. While some might view
the projected doubling of atmospheric carbon dioxide
concentrations by 2050 resulting in a global temperature
increase of 4 o C as not particularly disturbing–after
all, some would prefer a Michigan climate more comparable
to Mississippi–the consequences of such an
increase would be catastrophic: more powerful storms,
shifting drought patterns, and the disappearance of
much of our coastline (including Florida) with the sea
level rise associated with melting polar ice caps.
But global sustainability faces other challenges. In
2005 the United Nations projected the Earth’s population
in the year 2050 as 9.1 billion, 50% larger than today.
Which of course raises the logical question: Can
we sustain a population of that magnitude on Spaceship
Earth In fact, the basic premise of the U.S. free
market system, which relies on steady growth in productivity
and profits, based in part on similar growth
in consumption and population, must be challenged by
the very serious problems that result from a ballooning
global population, such as energy shortages, global climate
change, and dwindling resources. The stark fact is
that our planet simply cannot sustain a projected population
of 8 to 10 billion with a lifestyle character-izing
the United States and other developed nations with our
consumption-dominated economy.
To be sure, there are some signs of optimism: a slowing
population growth that may stabilize during the
21 st century, the degree to which extreme poverty appears
to be receding both as a percentage of the population
and in absolute numbers, and the rapid economic
growth of developing economies in Asia and Latin
America. Yet as a special report on global sustainability
in Scientific American warned: “As humanity grows in
size and wealth, it increasingly presses against the limits
of the planet. Already we pump out carbon dioxide
three times as fast as the oceans and land can absorb it;
mid-century is when climatologists think global warming
will really begin to bite. At the rate things are going,
the world’s forests and fisheries will be exhausted even
sooner. As E. O. Wilson puts it, we are about to pass
through ‘the bottleneck’, a period of maximum stress
on natural resources and human ingenuity” (Scientific
American, 2005).
The United States faces a particular challenge and
responsibility in addressing this issue. With just 4.5%
of the world’s people, we control 25% of its wealth and
produce 25% to 30% of its pollution. It is remarkable
that the richest nation on earth is the lowest per capita
donor of international development assistance of any
industrialized country. As the noted biologist Peter Raven
observes: “The United States is a small part of a
very large, poor, and rapidly changing world, and we,
along with everyone else, must do a better job. Globalization
appears to have become an irresistible force, but
we must make it participatory and humane to alleviate
the suffering of the world’s poorest people and the effective
disenfranchisement of many of its nations” (Raven,
2002).
Still More Possibilities
There are other possibilities that might be considered
for the longer-term future. Balancing population
growth in some parts of the world might be new pandemics,
such as AIDS or an avian flu virus, that appear
out of nowhere to ravage our species. The growing
divide between rich and poor, the developed nations
and the third world, the North and South hemispheres,
could drive even more serious social unrest and terrorism,
perhaps armed with even more terrifying weapons.
Then, too, the unrelenting pace of technology could
benefit humankind, extending our lifespan and quality
of life (although perhaps aggravating population
growth in the process), meeting the world’s needs for
food and shelter and perhaps even energy, and enabling
vastly new forms of communication, transportation,
and social interaction. Perhaps we will rekindle
our species’ fundamental quest for exploration and
expansion by resuming human spaceflight and eventually
colonizing our solar system and beyond.
But technology will also present new challenges that

18
seem almost taken from the pages of science fiction. If
digital technology continues to evolve at its current pace
for the next decade, creating machines a thousand, a
million, a billion times more powerful that those which
are so dominating our world today, then phenomena
such as the emergence of machine consciousness and
intelligence become very real possibilities during this
century. In fact some even suggest that we could encounter
a “technological singularity,” a point at which
technology begins to accelerate so rapidly (for example,
as intelligent machines develop even more intelligent
machines) that we lose not only the ability to control
but even to predict the future (Kurzweil, 1999).
Clearly phenomena such as machine consciousness,
contact by extraterrestrial intelligence, or cosmic extinction
from a wandering asteroid are possibilities for
our civilization, but just as clearly they should neither
dominate our attention nor our near-term actions. Indeed,
the most effective way to prepare for such unanticipated
events is to make certain that our descendants
are equipped with education and skills of the highest
possible quality.
trade and open borders (at least relative to most other
nations), and universities and research laboratories that
are the envy of the world. If all of this remained in place,
strong and healthy, the United States would continue to
remain prosperous and secure, even in the face of an
intensely competitive global knowledge economy. We
would continue to churn out the knowledge workers,
the ideas and innovation, and the products and services
(even if partially outsourced) that would dominate the
global marketplace. And, of course, the same could be
said for a state like Michigan.
This, then, provides the context for an assessment of
Michigan today.
Hakuna Matata
When confronted with these concerns–particularly
those associated with the challenge of a global, knowledge-driven
economy to our national prosperity and
security–some suggest that the emergence of a “flat
world” is just another one of those economic challenges
that arise every decade or so to stimulate American
industry to bump up its competitiveness yet another
notch. Hakuna Matata, not to worry! After all, many
predicted doom and gloom in the face of Japanese competition
in the 1980s. American industry found a way
to adapt and compete. Just look at the difficulties Japan
faces today.
It is certainly true that many of the characteristics
of our nation that have made the United States such
a leader in innovation and economic renewal remain
strong: a dynamic free society that is continually renewed
through immigration; the quality of American
intellectual property protection and the most flexible
labor laws in the world, the best regulated and most efficient
capital markets in the world for taking new ideas
and turning them into products and services, open

19
Environmental Scans
Today (2005)
Tomorrow (2010-2050)
Globalization
Transport + Commun
Integrated Economies, Culture, Conflict
Demographics
Population Growth
Baby-boomers vs. Global Teenager
Diversity
Exponentiating Technologies
Info-bio-nano technology
Complex systems
Explosion of New Knowledge
Implications
Hypercompetitive, global,
knowledge-driven economy
Global disparity in wealth and power
driving geopolitical conflict
Market forces dominating public policy
Obsolescence of existing social
institutions (e.g., nation-state)
Global Sustainability
Population growth to 8 - 10 billion
End of Fossil Fuels
Global Climate Change
Hypercompetitive, integrated, global economy
China, India, Eastern Bloc
Off-shoring
National/homeland Security
Terrorism vs. Freedom
Exponential Technologies
Possible surprises:
Human lifespan doubles (or pandemics)
Disappearance of work
Artificial intelligence (”mind children”)
Contact
Michigan Challenges
Erosion of Traditional Economic Base
Low-skill jobs (outsourcing) and high-skill jobs (off-shoring)
No obvious candidate for future economic engine
Current culture hostile to innovation
Increasing obsolescence of social institutions–but resistant to change
Government, corporations, labor, education
Political system, public opinion
Structural budget obsolescence
Unfunded mandates (Medicaid, K-12, Corrections)
Obsolete tax system (irrelevant to a service economy)
Inadequate Michigan leadership
Sense of denial–hoping the past will return
Lack of vision–and inability to develop one
Clueless–today’s political issues are meaningless
(gay marriage, affirmative action, creationism, stem cell ban)
Current priorities are basically stupid
Detroit casinos, SUVs, Michigan football
Investments in higher education, research, and innovation are
Woefully inadequate (lowest in Midwest)
Blatantly political (Merit Scholarship Program, Life Sciences Corridor)
Tragically ill-considered (Low tuition + low support = low quality + low access;
targeting R&D investments to areas of weakness)

20
Chapter 3
Michigan Today: A Knowledge Resource Map
Throughout the 20 th century, both America and
Michigan have been leaders in the world economy. As
we have noted, the democratic values and free-market
practices of the United States, coupled with institutional
structures such as stable capital markets, strong
intellectual property protection, flexible labor laws, and
open trade policies, positioned our nation well for both
economic prosperity and security. With a highly diverse
population, continually renewed and re-energized by
wave after wave of immigrants, America became the
source of the technology and innovation that shaped
the 20 th -century global economy.
So, too, Michigan’s history as a frontier state gave
it a priceless legacy of pioneering spirit, gritty courage,
and self-reliance. Our ancestors made our farms and
our factories the best in the world. Michigan believed in
its people, and invested heavily in their education and
training, catapulting the state into a position of global
leadership in innovation, productivity, and trade.
There was broad recognition that it was our people,
their character, knowledge, skill, and ability to innovate,
that would give Michigan the competitive edge.
A century ago, Michigan led the nation in building
just such knowledge resources. State government created
a great education system aimed at serving all of its
citizens, demonstrating a remarkable capacity to look
to the future and a willingness to take the actions and
make the investments that would yield prosperity and
well-being for future generations. Michigan companies
invested heavily in R&D and technological innovation,
working closely with the state’s research universities.
The leaders of our state understood well the importance
of investing heavily with both public tax dollars
and private capital in those areas key to prosperity in
an industrial economy. And the payoff was enormous,
as Michigan led the world in productivity, technology,
and prosperity.
But that was yesterday. What about Michigan today
Here, the vital signs are disturbing. The spirit of
public and private investment for the future appears to
have vanished in our state. In recent decades, failed public
policies and inadequate investment have threatened
the extraordinary educational resources built through
the vision and sacrifices of past generations. Michigan
business and industry have reduced very significantly
the level of basic and applied research and now focus
their efforts primarily on product development based
on available technologies rather than exploring innovative
breakthroughs. Ironically, at a time when the rest
of the world has recognized that investing in education
and knowledge creation is the key to not only prosperity
but, indeed, survival, too many of Michigan’s citizens
and leaders, in both the public and private sector,
have come to view such investments as a low priority,
expendable during hard times. The aging baby boomer
population that dominates public policy in our state demands
instead expensive health care, ubiquitous prisons,
homeland security, and reduced tax burdens rather
than investing in the educational resources and knowledge
infrastructure essential to our state’s future.
While a candid assessment of our state’s current
capacity to create a competitive workforce and knowledge
infrastructure for today’s global economy will
likely ruffle some feathers of those clinging tightly to
past successes and present policies, it is nevertheless
imperative that we begin the roadmapping process by
facing the realities of Michigan today.
The Michigan Economy
The state of Michigan has a population of about
10 million, ranking 8 th in size nationally. Although the
state’s population increased about 7% from 1990 to 2000,
it lagged considerably behind the 13% growth rate for

21
Michigan’s dependence on manufacturing can be seen in
the high concentration of the auto industry (MDLEG, 2005).
the nation as a whole (U.S. Census Bureau, 2004). Over
one-quarter of this population growth has come from
foreign-born immigrants.
More significant than population growth has been
the aging of the state’s population. Although in part due
to the aging of the baby boomers, this has been aggravated
by an anticipated loss of 12% in its 25- to 44-year
old population from 2000 to 2025 as this group seeks
new experiences and more dynamic regional economies
outside of Michigan. This “brain drain” is the fourth
largest percentage decline in the nation and will pose a
very serious challenge to the Michigan workforce as it
continues to age. Although not as dramatic, Michigan
is expected to see a 4.2% decrease in the 18 to 24 age
group, the ninth largest in the country.
The economy of Michigan is approximately $308
billion per year, which ranks it 16th in the world, greater
than Argentina, Belgium, Switzerland, and Russia.
However there are many signs that the state is struggling
to make the necessary transition from a manufacturing
economy to a knowledge economy. Today Michigan’s
per capita personal income is $30,296, 2.7% below
the national average of $30,941. According to a recent
study at the University of Michigan, per capita income
grew nearly 12% slower than the national average from
1969 to 2003, the fifth-worst record of income growth
among the states over this three-decade-long period.
There are approximately 4.7 million workers in
Michigan. While the national economy has seen the
strong growth in the service sector (+32.7%), Michigan’s
economy is still highly reliant on factory-based
manufacturing. The state’s share of earnings from
manufacturing is the third highest in the nation, while
Michigan’s share from high-paying, knowledge-based
industries was 3.5% below the national level. Furthermore,
Michigan is one of only 15 states where manufacturing
provides a greater share of employment earnings
than high-pay knowledge-based industries. Yet, in
terms of actual employment, only 700,000 of Michigan
jobs are in manufacturing, compared to over 2 million
in knowledge-based industries (45% of total employment).
As low-skill, high-pay factory jobs were eliminated
through enhanced productivity or shifted to lower cost
states or nations, Michigan lost 254,000 jobs from 2000
to 2003, a 22% decline, among them 163,000 manufacturing
jobs. In 2004 Michigan had the worst performing
state economy in the nation, ranking as the only state
that has lost more jobs than it created, according to the
Joint Economic Committee of Congress. Michigan’s
unemployment rate leads the nation at over 7%, with
little hope for reversal in the near term as major employers
in manufacturing plan to close more plants and
cut thousands of more jobs. Michigan’s poverty rate is
increasing, rising to 12.3% in 2004 as manufacturing
jobs disappear. Its major metropolitan area, Detroit, has
become the nation’s poorest city, with one-third of its
population living below the federal poverty level and
nearly half of Detroit children living in impoverished
homes. While many other states have also experienced
significant declines in manufacturing employment,
they are managing to replace these with knowledgeservices
jobs. Michigan has not been so fortunate and
lags most of the rest of the nation in its effort to create
new high-skill jobs.
High concentrations in high-pay knowledge-based
industries and a higher proportion of 25- to 44-yearold
college graduates are associated with the high and
rapidly growing per-capita income of the dominant regions
of the more successful states. These regions are
characterized by small concentrations of manufacturing,
having evolved into post-industrial economies. By
contrast, Michigan’s two largest metropolitan regions
have substantially lower per-capita incomes with far
slower growth rates, more concentrated in manufacturing
and less in high-pay knowledge industries,
and lower in the portion of young college graduates.

22
Although one thinks first of economic difficulties experienced
by the Detroit metropolitan area, ironically,
the economy of Grand Rapids is even more industrial
and less knowledge-intensive, with a per capita income
nearly $6,000 less than Detroit (and more than $13,000
less than New York). This not only illustrates the importance
of a post-industrial economy, but it also suggests
that Michigan’s efforts to retain manufacturing jobs
may be at cross-purposes to achieving prosperity in the
global knowledge economy. As Glazer and Grimes suggest,
these data raise serious doubts about the wisdom
of current strategies to save manufacturing jobs as the
state’s top economic priority. Beyond the difficulty in
countering the powerful forces of trade and technology
that are driving manufacturing jobs offshore, clinging
to its manufacturing past could well leave the state
a backwater in the developing knowledge economy
(Glazer, 2005).
Educational Resources
Michigan has a rich heritage in higher education,
with 15 four-year public universities, more than 50 independent
colleges, universities and institutes, and
29 public two-year community colleges. The public
four-year institutions span the breadth of university
types and include two AAU-class research universities
(UMAA, MSU), other research universities (WSU,
WMU, MTU), and other four-year universities (EMU,
OU, CMU, FSU, NMU, LSSU, GVSU, SVSU, UMF,
UMD). These institutions enroll approximately 660,000
students (four-year publics: 275,810; two-year publics:
192,051; four-year privates: 98,436; 2-year privates:
1,334) (Almanac, 2004). Degrees awarded at these institutions
in 2003 included: Associate: 19,534; Bachelor’s:
46,115; Master’s: 21,342; Doctorate: 1,403; Professional:
2,371.
The impact of these institutions is considerable. Beyond
producing almost 90,000 graduates each year, detailed
studies have indicated that these public universities
have an extraordinary economic impact, estimated
in 1999 to be over $39 billion (Stanford Research Institute,
2002). Since the state appropriation for its public
universities that year was $1.5 billion, for each dollar
the state invested, the economic impact was over $26, a
rather remarkable leveraging of state tax dollars. Today
this multiplier would be considerably larger, perhaps
as high as 50-fold, both because of increasing value
of the activities of Michigan’s public universities in a
knowledge-driven economy (e.g., the growth in R&D)
and because of an erosion of over 25% in state appropriations
during the past five years. In fact, since state
appropriations provide less than 7% of the support of
the $4.5 billion/year budget of the University of Michigan
(compared to roughly one-third of the support for
the state’s other public universities), this investment
multiplier would be even larger for UM.
The state has also explored the use of information
technology in creating Internet-based learning initiatives.
Michigan Virtual University is a private, notfor-profit
Michigan corporation established in 1998 to
deliver online education and training opportunities to
the Michigan workforce. The Michigan Community
College Association has created a virtual learning collaborative
(MCCVLC) among Michigan’s community
colleges. Finally, one of the most successful initiatives
has been the Freedom to Learn program, a statewide
initiative aimed at integrating technology skills into the
6th grade environment to re-engage children in learning
with an individualized education plan.
The state boasts an array of museums numbering in
the hundreds. Those museums range in size and scope
and include such jewels as the nationally renowned
Henry Ford Museum featuring one of the largest collections
of its kind, dedicated to preserving America’s
technological and cultural progress (National Park Service,
2004); Cranbook Institute of Science & Art; the Detroit
Institute of Arts; the Flint Cultural Center; and the

23
Sloan Museum, to name a few.
Michigan has 387 main libraries, 277 branch libraries
and 17 bookmobiles providing public library service
in Michigan (Library of Michigan, 2002). Those libraries
house more than 6500 public-access computers, about
5000 of which have Internet access. And, according to
the Library of Michigan, Michigan public libraries are
the “number one point of online access for people without
an Internet connection at home, school or work.
Computers were used 12.7 million times in 2001.” The
state’s digital library, Michigan eLibrary is accessible to
all Michigan residents. The digital library subscribes to
more than 35 databases, hundreds of magazines and
newspapers and more than 10,000 electronic books.
In addition, Michigan has 104 postsecondary libraries
at its public 4-year universities, independent colleges
and universities and community colleges. And with
the UM-Google project, aimed at digitizing and distributing
online the collections of several of the world’s
great libraries, every Michigan citizen may soon have
direct access to much of the world’s knowledge in their
home–or on their cellphone!
If the good news is that Michigan benefits from one
of the leading higher-education systems in the nation,
with extensive additional resources in its museums and
libraries, the bad news is that a faltering state economy
and misguided public policies have put these knowledge
and learning resources at very considerable risk.
For two decades state support of public higher education
has been declining as a share of state tax expenditures,
with a more precipitous loss of roughly 25% of
state appropriations for the state’s public universities
over the past four years. Furthermore, beyond the level
of funding, Michigan’s policies for funding higher education
are badly flawed.
Although the state appropriates almost $2 billion
each year to higher education, in reality much of this
is dispersed for political benefit rather than aimed at
access to quality higher education. More specifically,
in FY2004, Michigan appropriated $1.53 billion to its
public universities; another $648 million to community
colleges ($379 from local property taxes and $289
from state appropriations); and $267 million for financial
aid programs ($130 million for merit-based aid and
$65 million to private colleges). But for each of the past
several years, in the face of a serious budget crisis, the
state has reduced funding for its public universities, to
the point that in FY2004-2005 state support per student
had dropped to $5,721, compared to other Great Lakes
states averaging $6,735, and ranking in the bottom third
in the nation.
The state’s public colleges and universities have been
able to survive largely because of their constitutional
autonomy, which gives them the control over decisions
such as admissions policies, tuition and fees, faculty
and staff compensation, procurement, and other areas
sometimes micromanaged by state government. But, as
a consequence of inadequate state support, several of
these institutions are increasingly becoming “privately
financed public universities.” In fact, the state’s flagship
campus, the University of Michigan-Ann Arbor, now
finds that state appropriations account for less than 7%
of its operating budget, and this percentage is almost
certain to drop still further in the years ahead.
Ironically, despite the precipitous decline in state
support, Michigan’s public colleges and universities
have remained highly affordable, due in very large
measure to strong, need-based financial aid programs
launched by the institutions themselves to preserve access.
A recent study found that the average Michigan
family is paying only 45% of the full tuition sticker
price at Michigan’s 15 public universities. In fact, the
real cost of public higher education in Michigan, when
scholarships, grants, and federal tax credits are taken
into account, has actually gone down since 1998 when
adjusted for inflation, despite a 25% reduction in state
support per student. However it is also clear that Michigan’s
public universities have been pushed to the wall
by state appropriations cuts, and tuitions (and real costs

24
to students and parents) are likely to rise dramatically
in the next several years if these cuts are not restored by
state government (PCSUM, 2004).
Human Capital
Although Michigan’s age distribution is very much
at the national average, there is an anticipated peak in
high school graduates in 2008, with a slight drop from
2008 to 2011 (although adult-learner demand will almost
certainly compensate for this). In postsecondary
education, Michigan is very similar to the national average
with a 56.5% women enrollment (the national average
is 56.1%), although minority enrollment in higher
education is lower than the national average with 17.9%
in Michigan compared to 28.2% nationally (Almanac Issue,
2004). As we noted earlier, not only is Michigan’s
population aging, but the out-migration of our 25- to
44- year old population–the fourth most severe among
the states–creates a brain drain with very serious implications.
Equally disturbing is the clear failure in achievement
at all levels of our educational system. Despite the fact
that Michigan ranks as a national leader in measures
such as K-12 teacher salaries, the performance of our
primary and secondary schools over the past several
decades has been inadequate. An estimated 44% of
Michigan adults currently function at a literacy level
one or two in the national Adult Literacy Survey, levels
considered too low to function adequately in today’s
society. 23% of Michigan’s current adult population do
not have a high school diploma. Only 73% of Michigan
9 th graders graduate from high school four years
later. Furthermore, only 42% of high school freshmen
in Michigan enroll in college four years later, although
90% of 8 th graders say they want to go to college, while
only 32% of Michigan high school students graduate
with college-ready transcripts, putting the state below
the national average of 36% and well behind lead states
at 49%.
Although Michigan’s system of higher education is
generally regarded as one of the nation’s best, here too
there are challenges. The state’s college graduation rates
rank below the national average and far below competitor
states such as California, Massachusetts, and
Minnesota. Although Michigan is home to over 100 colleges,
universities, and vocational technical institutions
with more than 660,000 students enrolled, half of the
students entering Michigan’s colleges will not complete
a college degree (more than 300,000 dropouts!). Despite
high graduation rates at its flagship universities (UM at
90% and MSU at 70%), all other public colleges are at
less than 50%.
Michigan’s current population has a 22% level of
bachelor’s or advanced degrees, 4% below the national
average, ranking Michigan 34 th nationally. Michigan
ranks below the national average in the fraction of science
and engineering degrees (27% compared to 30%),
with this fraction continuing to decline in recent years.
The share of its workforce trained in science and engineering
is also below the national average (6.9% compared
to 8.2%) and has been dropping over the past decade.
Fortunately despite the out-migration of young
knowledge workers, Michigan’s research universities
have demonstrated the capacity to attract science and
engineering students from other states and nations.
Furthermore, Michigan has a relatively high rate of retaining
high-tech graduates of its universities (79% of
instate and 55% of outstate graduates).
This latter statistic is very important. We have noted
the growing evidence that a skilled-worker shortage,
created by low birthrates, out-migration of young
adults, and poor performance of our educational system,
poses a serious threat to Michigan’s economy.
Michigan faces a serious shortage in the human capital
required for a knowledge economy, particularly in areas
such as science, engineering, information technology,
and other knowledge-intensive disciplines. Michigan’s
research universities have demonstrated the capacity
to compensate to some degree by utilizing their quality
and reputation to attract and retain in the state both
their graduates and those they attract from around the
world. Yet all too often, state politicians object to Michigan
universities enrolling students from other states or
nations, apparently oblivious to the fact that over the
longer term, the capacity of our academic institutions
to attract talented students, knowledge workers, and
companies from around the world is of extraordinary
importance to our state.

25
Research and Development
Although federal statistics (National Science Board,
2004) portray Michigan’s research and development activities
as a proportion of gross state product as relatively
high at 5.8%, compared to a national average of
2.5%, this metric is distorted by the very high level of
product development activity in the automobile and
pharmaceutical industries, in contrast to more fundamental
basic and applied research, which has largely
disappeared from most of Michigan industry with
the effective demise of the Ford Scientific Laboratory
and the General Motors Research Laboratories. In reality,
Michigan industry conducts relatively little basic
research, with most product innovation based on extrapolations
of existing technology rather than upon
breakthrough science. This is particularly important in
view of the fact that new high tech industry is usually
spawned by spinoffs from basic research, not product
development.
Michigan’s level of federally sponsored R&D has
generally been among the lowest among the states
(ranking at less than one-third the national average) because
of the absence of major federal laboratories, the
one notable exception being the R&D center of the U.S.
Army Tank Command (TACOM) in Warren. This low
level of federally sponsored R&D activity in the state is,
in part, a consequence of the low priority given such efforts
by the Michigan Congressional delegation, which
has typically focused most of its efforts on fighting
federal regulations that might threaten the automobile
companies and organized labor in the state. Michigan
historically has ranked at the bottom of the states in return
of federal tax dollars.
Although Michigan’s manufacturing industry is
heavily technology-dependent, Michigan’s high-tech
sector is smaller than the national average (5.6% compared
to 6.0% nationally). Perhaps of most concern,
however, is the relative weakness in high-tech spinoffs
and startups. But again this should not be surprising,
since Michigan ranks at the bottom of the states in the
availability of venture capital, currently at only onetenth
the level of the national average.
Michigan’s level of academic research activity is
more comparable to the national average, but this is primarily
due to one institution, the University of Michigan-Ann
Arbor, which historically has ranked among
the nation’s leaders in federal research grants and contracts,
with over $750 million in research expenditures
in 2004. Similarly, doctorate production in science and
engineering is also somewhat above the national average,
again because of the leadership of UMAA’s graduate
programs. While much of this research is quite basic
in areas such as high-energy physics and molecular genetics,
much of it is “use-directed basic research” in areas
such as laser diagnostics, composite materials, and
communications networks with direct implications for
industrial applications.
The role played by the University of Michigan in
the state’s future does not go unnoticed by the public
at large. In surveys and focus groups, when asked to
name the most important asset of the state for its future,
participants invariably mention the University of
Michigan at the top of the list–above General Motors
and Ford, state government, or urban areas. Ironically,
the Michigan public may understand something that
has been forgotten by state leaders.
State government has attempted to launch several
initiatives in recent years aimed at stimulating hightech
economic development. The most visible such effort
was the Life Sciences Corridor, funded initially by
allocating $50 million per year from the state’s tobacco
settlement funds, and intended to build a path of biotechnology
development across southern Michigan,
linking the state’s universities (particularly UMAA,
MSU, and WSU) with private research centers such as
Grand Rapids’ Van Andel Institute and the pharma-
University research facilities

26
ceutical industry (primarily Pfizer). More recently, this
has been extended to become the Michigan Technology
Tri-Corridor, focused on R&D and commercialization
in the fields of life sciences, advanced automotive technology,
and homeland security. In addition the state has
established roughly a dozen “Smart Zones” with tax
structures favorable to high-tech businesses and Business
Accelerators to help companies incubate and commercialize
products.
However such government efforts have yet to
stimulate high-tech economic development at the
level experienced in other regions such as the Silicon
Valley, San Diego, the Research Triangle, Austin, or
Route 128. Part of the problem has been the tendency
to focus public funding in areas of declining economic
activity (e.g., manufacturing or automotive technology)
or where Michigan has little established strength (e.g.,
genomics, biotechnology, homeland security). It is also
the case that state government seems to have forgotten
that other successful high-tech regions evolved from
world-class research universities (e.g., Stanford, MIT,
the University of California, the University of Texas)
that were generously supported by both tax dollars and
private capital and instead has methodically underfunded
public higher education in recent years.
Other Assets
Michigan has other knowledge assets with major
implications for the state’s future. Although not widely
recognized by either state leaders or industry, the state’s
universities played a major role in building the Internet
that today drives much of the global economy. In the
1980s, the Merit computer network consortium, located
in Ann Arbor, and operated by Michigan’s public universities,
joined with IBM and MCI in building NSFnet,
the backbone national network for scientific research.
This Michigan-managed network was later expanded
to include other federal networks (DOD, DOE, NASA)
and eventually was renamed the Internet. As network
traffic began to grow exponentially in the early 1990s,
doubling every few months, Merit spun off the Internet
to commercial providers. But today in Ann Arbor,
a successor organization, Internet2, is developing the
next generation of Internet technology, leading a consortium
of hundreds of research universities and technology
companies. Internet2 has recently also assumed
the management of the National LambaRail, an ultra
high-speed national network for advanced Internet applications
and research.
Similar advanced IT development activities are
being led by the University of Michigan through the
SAKAI project, a consortium of research universities
(led by UM, MIT, Stanford, Indiana, and Oxford) that is
developing the middleware architecture for university
instruction, research, and enterprise systems. Together
with the recently announced UM-Google library digitization
project, which aims at digitizing and placing
both on line and searchable the entire contents of several
of the world’s great libraries (UM, Stanford, Harvard,
Oxford, New York Public Library), the University
of Michigan is rapidly establishing itself as a leader in
advanced information technology and software development.
The state has also benefited very significantly from
the leadership of Michigan State University in the application
of biotechnology to agriculture and natural
resources, stimulated by an earlier state investment in
the Michigan Biotechnology Institute and MSU’s strong
international reputation in agricultural research and
development.
Although Michigan has long been a leader in the
pharmaceutical industry, with established companies
such as UpJohn, Parke-Davis, and Warner Lambert, a
series of recent acquisitions (UpJohn by Pharmacia and
then Pharmacia and Warner Lambert by Pfizer) has focused
these efforts into a major Pfizer R&D complex in
Ann Arbor. While this center has provided strong leadership
for the pharmaceutical industry in the past, e.g.,
through the development of the anti-cholesterol drug
Lipitor, the presence of yet another major Pfizer R&D
center in North America (Connecticut) raises concerns
that in the next downturn of the industry it could be at
some risk.
Another important state asset in the life sciences
area, in addition to the activities of UM, MSU, and WSU,
is the Van Andel Institute in Grand Rapids, a privately
financed effort to build a world-class research institute
in biomedical research. In fact, this institution plays a
major role as the Western Michigan anchor for the statefunded
Life Science Corridor, stretching across southern
Michigan. Yet here too there is are cautionary notes.

27
The Writing on the Wall
Pfizer Research Laboratories in Ann Arbor
First, the traditional strength of biomedical research in
Michigan has been in applied areas such as pharmaceutical
and clinical research, not in the more fundamental
areas of genomics and proteomics. The difficulty that
the UM Life Sciences Institute has encountered recruiting
world-class talent in these latter areas suggests that
Michigan faces a considerable challenge to catch up
with more established basic research efforts in other regions
(e.g., San Diego, San Francisco, Seattle, Boston,
Washington). Furthermore, although biotechnology is
an exciting and rapidly evolving technology, the actual
employment by biotechnology companies is quite modest
compared to those in areas such as information or
financial services (think chemical processing plants).
Clearly any candid appraisal of Michigan’s current
situation does not inspire confidence that the state is
headed in the right direction. Michigan’s under-investment
in advanced education, research, and innovation,
coupled with short-sighted public policies and corporate
strategies that further constrain efforts to build a
high-skill workforce and generate the research, innovation,
and entrepreneurial zeal necessary to achieve a
knowledge economy, should be a matter of great concern
to state leaders. The keys to economic growth in
a global, knowledge-driven economy are a world-class
workforce and a knowledge infrastructure capable of
stimulating innovation. These are the assets that will
save Michigan from becoming a backwater economy,
providing a point of lift off, from which we can create
new markets, processes, and skills.
Learning and knowledge generation are becoming
a powerful political force throughout our nation
and around the world, as competitiveness in a global,
knowledge-driven economy depends increasingly on a
highly educated workforce, new knowledge, and innovative
products and services. Just as the space race of
the 1960s stimulated major investments in research and
education, there are early signs that the skills and innovation
race of the 21st Century may soon be recognized
as the dominant policy of our times. But there is an important
difference here. The space race galvanized public
concern and concentrated national attention on educating
“the best and brightest,” the elite of our society.
Michigan Today
Graduates Research Service
Workforce
Knowledge
Graduates
Flagship Research Universities (UMAA, MSU)
Doctoral Universities (WSU, WMU, MTU)
Regional Public 4-y “Colleges: (EMU, CMU, NMU
...FSU, LSSU, OU, GVSU, SVSU, UMD, UMF)
For-Profit Colleges (U. Phoenix,...)
Trade Schools
Corporate Workplace Training
Michigan Virtual University
Community Colleges
Independent Colleges
Selective Colleges (Kalamazoo, Hope,...)
Open Colleges
Public K-12
Charter Schools
Home Schooling
Cultural Resources
Libraries
Museums
Performing Arts
Informal Education
Community groups (Scouts)
Religious groups
Extracurricular activities

28
The skills race of the 21st Century will value instead the
skills and knowledge, the innovation, and the capacity
for adapting to change our entire workforce as a key to
economic prosperity, security, and social well-being.
Hence the primary challenge to Michigan today becomes
very much one of restoring an adequate balance
between meeting today’s desires of an aging population
and investing in the state’s future through building
and sustaining a world-class learning and knowledge
infrastructure for Michigan tomorrow. The challenge to
state leaders is to develop visionary policies, outstanding
institutions, and world-class infrastructure that will
produce the knowledge workers, the educated professionals,
and the new knowledge necessary to build and
attract new knowledge-based industries capable of
driving future economic growth.

29
Chapter 4
Michigan Tomorrow: A Knowledge Society
The next stage in the roadmapping process, after assessing
where our starting point is, i.e., Michigan today,
is to figure out where we need to head. The task is
to develop a vision for Michigan’s future. And key in
this is a broader consideration of the educational and
knowledge needs of our state.
A vision for Michigan tomorrow can best be addressed
by asking and answering three key questions:
1. What skills and knowledge are necessary for individuals
to thrive in a 21st-century, global, knowledge-intensive
society
2. What skills and knowledge are necessary for a population
(workforce) to provide regional advantage in
such a competitive knowledge economy
3. What level of new knowledge generation (e.g.,
R&D, innovation, entrepreneurial zeal) is necessary
to sustain a 21st-century economy, and how is this
achieved
In a sense, these are similar to the questions addressed
by the recent Lt. Governor’s Blue Ribbon Commission
on Higher Education and Economic Growth:
• How does a state build a dynamic workforce of employees
who have the talents and skills needed for
success in the 21st century
• How could Michigan double the percentage of citizens
who attain post-secondary degrees or other
credentials that link them to success in the Michigan
economy
• How can the state better align Michigan’s institutions
of higher education with emerging employment
opportunities in the state’s economy
(See Appendix A for a more detailed comparison.)
Of course, there are more subtle questions: What
does it mean to be “an educated person” in the 21st
century What does it mean to be “literate” What will
be our needs for the deeper purposes of the university,
such as its capacity to generate new knowledge, to
preserve and transfer the cultural achievements of our
civilization from one generation to the next, to serve as
a constructive social critic, and to produce the human
capital and innovation necessary for prosperity and security
Yet here our primary focus in this study must
concern those aspects of higher education and other
knowledge resources key to the future prosperity of the
State of Michigan.
Clearly, the implications of a global, knowledgedriven
economy for discovery-based learning and
knowledge institutions are particularly profound. The
relationship between societal change and the institutional
and pedagogical footing of research universities
is clear. The knowledge economy is demanding new
types of learners and creators. Globalization requires
thoughtful, interdependent and globally identified citizens.
New technologies are changing modes of learning,
collaboration and expression. And widespread social
and political unrest compels educational institutions
to think more concertedly about their role in promoting
individual and civic development. Institutional and
pedagogical innovations are needed to confront these
dynamics and insure that the canonical activities of universities
– research, teaching and engagement – remain
rich, relevant and accessible.
The Educational Needs of a 21st-Century Citizen
Historically, people have always looked to education
as the key to prosperity and social mobility. Higher
education in America has been particularly responsive
to the changing needs of society during major periods
of social transformation: from a frontier to an agrarian

30
society, then to an industrial society, through the Cold
War tensions, and to today’s global, knowledge-driven
economy. Our universities evolved from the collegiate
model of the 18th century serving only the elite, to the
public university of the 19th century serving the working
class, and then once again to the research universities
of the 20th century critical to the economic prosperity,
public health, and security of the nation. As our society
changed, so too did the necessary skills and knowledge
of our citizens: from growing to making, from making
to serving, from serving to innovation, and today from
innovating to creating. With each social transformation,
an increasingly sophisticated world required a higher
level of cognitive ability–manual skills to knowledge
management, analysis to synthesis, reductionism to the
integration of knowledge, and finally creativity itself.
Now more than ever, people see education as their
hope for leading meaningful and fulfilling lives. The
level of one’s education has become a primary determinant
of one’s personal economic security. Just as a high
school diploma became the passport for participation
in the industrial age, today, a century later, a college
education has become the requirement for economic
security in the age of knowledge.
Yet most people–and politicians–continue to think
of a college education almost as a high school experience,
with young students listening to professors lecturing
about history or literature. It is important to
challenge these old-fashioned perspectives with a dose
of the current realities, e.g., students studying intricate
subjects such as software engineering, biotechnology,
neurosurgery, or global supply chain management,
since these are the majors of today of students preparing
for rewarding careers tomorrow. The skills of these
disciplines are not mastered in the lecture hall but in
the laboratory, surgery suite, or through international
experience. Clearly such advanced education does not
come cheap. But it also has never been more necessary.
Today over 65 percent of the new jobs created by
our knowledge-driven economy require education at
the college level, and for many careers, a baccalaureate
degree will not be enough to enable graduates to
keep pace with the knowledge and skill-level required
for their careers. The knowledge base in many fields is
growing exponentially. In some fields the knowledge
taught to students becomes obsolete even before they
graduate! Hence a college education will serve only as
a stepping stone to a process of lifelong education. The
ability to continue to learn and to adapt to—indeed, to
manage—change and uncertainty will are among the
most valuable skills of all to be acquired in college.
There is also a serious misconception on the part of
the public about those served by today’s college and
universities. Less than 20 percent of today’s college students
fit the stereotype of eighteen- to twenty-two-yearolds
living on campus and attending college full-time.
Most college students are adults—in fact, one-quarter
are over the age of thirty. A college degree has become
key to a decent job in our knowledge-driven society,
and most of today’s students see a college education as
critical to their future quality of life, the key to a good
job, financial security, and well-being. Most students
have definite career objectives and are majoring in professional
or pre-professional programs. And while they
may have strong academic abilities and enjoy learning,
both financial and family responsibili-ties motivate a far
more utilitarian approach to their education. Since the
residential college experience is not as central to their
lives, they seek a different kind of relationship with the
university, much as they would other service providers
such as banks or filling stations. They approach their
education as consumers, seeking convenience, quality,
relevance, and low cost.
Today’s younger students also do not fit traditional
stereotypes. They are citizens of the digital age. They
have spent their early lives surrounded by robust, visual,
interactive media—not the passive broadcast media,
radio and television of our youth, but rather Nintendo,
home computers, the Internet, and virtual reality. They
learn by experimentation and participation, not by
listening or reading passively. They seem to embrace
interactivity and the right to shape and participate in
their learning and are comfortable with the uncertainty
that characterizes their change-driven world. These
students will increasingly demand new learning paradigms
more suited to their learning styles and more appropriate
to prepare them for a lifetime of learning and
change.
As Percy puts it, today’s students are no longer the
people our educational system was designed to teach.
Rather they are “digital natives” comfortable learning,
working, and living in the digital world, unlike those

31
of us who are “digital immigrants” who are struggling
to keep pace with digital technologies (Pensky, 2001).
This is not an easy task for educators, who for the most
part remain reluctant to embrace the new technologies
in their teaching and hence are increasingly detached
from today’s students (Gura and Percy, 2005).
New knowledge media is forcing us to rethink the
nature of literacy. We have seen the definition of literacy
shift before in history, from the oral tradition to the
written word to the images of film and then television
and now to the computer and multimedia. Of course
there are many other forms of literacy: art, poetry,
mathematics, science itself, etc. But more significantly,
the real transformation is from literacy as “read only,
listening, and viewing” to composition in first rhetoric,
then writing, and now in multimedia.
From a broader perspective, our society increasingly
values not just analysis but synthesis, enabled by the
extraordinary tools of the digital age. Increasingly, we
realize that learning occurs not simply through study
and contemplation but through the active discovery
and application of knowledge. From John Dewey to
Jean Piaget to Seymour Papert, we have ample evidence
that most students learn best through inquirybased
or “constructionist” learning. As the ancient Chinese
proverb suggests “I hear and I forget; I see and I
remember; I do and I understand.” To which we might
add, “I teach and I master!!!”
But here lies a great challenge. As noted earlier,
creativity and innovation are key not only to problem
solving but more generally to achieving economic
prosperity and sustaining national security in a global,
knowledge-driven economy. Yet while universities are
experienced in teaching the skills of analysis, we have
far less understanding of the intellectual activities associated
with creativity. In fact, the current disciplin-
A university is a community of masters and scholars (universitas
magistorium et scholarium), a school of universal learning (Newman)
embracing every branch of knowledge and all possible means for
making new investigations and thus advancing knowledge (Tappan).
“A Catholepistemiad for the 21st Century”
“A Knowledge Society”
“A Knowlege Net”
“A Learning Ecology”
Innovation
Creativity
Education
Learning
Human Capital
Culture
Democratic Values
Research
Discovery
Services
Engagement
University = “Universitas”
Flagship Research Universities (UMAA, MSU)
Doctoral Universities (WSU, WMU, MTU)
Regional Public 4-y “Colleges: (EMU, CMU, NMU
...FSU, LSSU, OU, GVSU, SVSU, UMD, UMF)
For-Profit Colleges (U. Phoenix,...)
Trade Schools
Corporate Workplace Training
Michigan Virtual University
Community Colleges
Independent Colleges
Selective Colleges (Kalamazoo, Hope,...)
Open Colleges
Public K-12
Charter Schools
Home Schooling
Cultural Resources
Libraries
Museums
Performing Arts
Informal Education
Community groups (Scouts)
Religious groups
Extracurricular activities

32
ary culture of our campuses sometimes discriminates
against those who are truly creative, those who do not
fit well into our stereotypes of students and faculty.
The university may need to reorganize itself quite
differently, stressing forms of pedagogy and extracurricular
experiences to nurture and teach the art and
skill of creation and innovation. This would probably
imply a shift away from highly specialized disciplines
and degree programs to programs placing more emphasis
on integrating knowledge. Perhaps it is time
to integrate the educational mission of the university
with the research and service activities of the faculty
by ripping instruction out of the classroom–or at least
the lecture hall–and placing it instead in the discovery
environment of the laboratory or studio or the experiential
environment of professional practice.
Today, learning has become a lifelong activity since
a changing world will demand that students continue
to learn, through both formal and informal methods,
throughout their lives. Of course, a college education
was never intended to provide all of the knowledge
needed for a lifetime. But in years past, most of the additional
knowledge necessary for a career could be acquired
informally, through on-the-job learning or selfstudy.
Today, however, both rapid growth of knowledge
and the multiple career transitions facing graduates
demand a more strategic approach to lifetime learning.
We need to rethink educational goals from this lifetime
perspective. We should view a college education as just
one step—an important step to be sure—down the road
of a lifetime of learning. This would allow us to better
match learning content and experiences with both the
intellectual maturation and the needs of the learner.
In a world driven by knowledge, learning can no
longer be regarded as a once-is-enough or on-again/
off-again experience. People will need to engage in continual
learning in order to keep their knowledge base
and skills up to date. Given this need, the relationship
between a student/graduate and the university may
similarly evolve into a lifetime membership in a learning
community.
Building a Competitive Workforce
As we move further into an age of knowledge, the
workforce will require more sophisticated education
and training to sustain its competitiveness. We have entered
an era when both the need and the demand for
advanced education and learning opportunities will
grow rapidly. Increasingly, the education and skills of
individuals are seen as the key to both their personal
quality of life and the broader strengths of their society.
Furthermore, the need for the ongoing education of the
existing workforce has created a rapidly growing market
for adult education at the college level.
Today’s college graduates will change careers several
times during their lives, requiring additional education
at each stage. Furthermore, with the ever-expanding
knowledge base of many fields, along with the
longer life span and working careers of our aging population,
the need for intellectual retooling will become
even more significant. Even those without college degrees
will soon find that their continued employability
requires advanced education. Some estimate that just
to keep an individual on pace with evolving workplace
skills and knowledge will require a time commitment of
roughly one day of education per week (Dolence, 1995).
This translates to one-fifth of the workforce in college
level educational programs at any time, or roughly 28
million full-time-student equivalents—compared to the
12.1 million full-time-equivalent students currently enrolled
in our colleges and universities.
Knowledge workers are likely to make less and less
distinction between work and learning. In fact, continuous
learning will be a necessity for continued work
relevance and security. Employers will seek individuals
who can consistently learn and master new skills to
respond to new needs. They will place less emphasis
on the particular knowledge of new employees than on
their capacity to continue to learn and grow intellectually
throughout their careers. From the employee’s perspective,
there will be less emphasis placed on job security
with a particular company and more on the provision
of learning opportunities for acquiring the knowledge
and skills that are marketable more broadly.
Both young, digital-media savvy students and adult
learners will likely demand a major shift in educational
methods, away from passive classroom courses packaged
into well-defined degree programs, and toward
interactive, collaborative learning experiences, provided
when and where the student needs the knowledge
and skills.

33
The increased blurring of the various stages of
learning throughout one’s lifetime–K-12, undergraduate,
graduate, professional, job training, career shifting,
lifelong enrichment–will require a far greater coordination
and perhaps even a merger of various elements of
our knowledge infrastructure.
The Importance of Technological Innovation
The creativity, ingenuity, and courage of innovators
will be critical to our nation and our state in the
21st century. As a superpower with the largest and
richest market in the world, the United States has consistently
set the standard for technological advances,
both creating innovations and absorbing innovations
created elsewhere. From Neil Armstrong’s walk on
the Moon to cellular camera phones, engineering and
scientific advances have captured people’s imaginations
and demonstrated the wonders of science. In fact,
groundbreaking innovation was the driving force behind
American success in the last century. An endless
number of innovations—from plastics to carbon fibers,
electricity generation and distribution to wireless communications,
clean water and transportation networks
to pacemakers and dialysis machines—has transformed
the economy, the military, and society, making Americans
more prosperous, healthier, and safer in the process
(Duderstadt, 2005).
Future breakthroughs dependent on research and
innovation will have equally powerful impacts. Sustainable
energy technologies for power generation and
transportation could halt, and someday even reverse,
the accumulation of atmospheric carbon dioxide and
ozone. Low-cost, robust pumps, microfilters, and diagnostic
tests could ensure that clean water is available
to all and wipe out waterborne illnesses. Preventing
terrorism could be greatly improved when vigilant sensors
as small as grains of sand can activate autonomous
robots to respond to security breaches. Technological
innovations already under development can make all
of these things possible.
The innovations that flow from advanced education
and research are not simply nice to have, like highdefinition
television; many are essential to the solutions
of previously intractable challenges. Research in materials,
electronics, optics, software, mechanics, and many
other fields will provide technologies to slow, or even
reverse, global warming, to maintain water supplies
for growing populations, to ameliorate traffic congestion
and other urban maladies, and to generate highvalue
products and services to maintain our standard
of living in a world of intense competition. To meet
these and other grand challenges, Michigan must be an
innovation-driven state that can capitalize on fundamental
advances in life sciences, physical sciences, and
engineering.
Michigan is part of a global economy, and research
and development are performed worldwide. Our multinational
corporations manage their R&D activities
to take advantage of the most capable, most creative,
and most cost-efficient engineering and scientific talent,
wherever they find it. Smaller firms without global
resources are facing stiff competition from foreign companies
with access to talented scientists and engineers—
many of them trained in the United States—who are the
equals of any in this country. Relentless competition
is driving a faster pace of innovation, shorter product
life cycles, lower prices, and higher quality than ever
before.
To meet the demands of global competition, other
states and nations are investing heavily in the foundations
of modern innovation systems, including research
facilities and infrastructure and strong technical workforces
(National Science Board, 2004). Some of the innovations
that emerge from these investments will be
driven by local market demands, but many will be developed
for export markets. As other regions develop
markets for technology-laden goods and international
competition intensifies, it will become increasingly
difficult to maintain a globally superior innovation
system. Only by investing in research and advanced
education can Michigan retain its competitive advantage
in high-value, technology-intensive products and
services, thereby encouraging multinational companies
to keep their R&D activities in this country.
Colleges and universities have a long history of
contributing to U.S. preeminence in technological innovation.
Research universities are particularly critical
to generating new knowledge, building new infrastructure,
and educating innovators and entrepreneurs. The
Land-Grant Acts of the nineteenth century and the G.I.
Bill and government-university research partnerships

34
of the twentieth century showed how federal action can
catalyze fundamental change. In the past, universities
dealt primarily with issues and problems that could be
solved either by a disciplinary approach or by a multidisciplinary
approach among science and engineering
disciplines. To meet future challenges, however, universities
will need a new approach that includes schools of
business, social sciences, law, and humanities, as well
as schools of science, engineering, and medicine. Solving
the complex systems challenges ahead will require
the efforts of all of these disciplines.
By combining research with education, universities
not only tap into the creativity of young people, but
also train them in critical thinking, research methodologies,
and solid engineering skills. Because of the high
quality of the people and tools provided by American
universities, industries have chosen to locate their facilities
in the United States, and emerging industries have
tended to cluster around major engineering research
universities (e.g., Silicon Valley, Route 128, Research
Triangle, etc.) where they have access to a continuous
supply of technical talent. An academic campus is one
of the few places where precompetitive, use-inspired,
long-term basic research can be conducted without
the constraints of quarterly earnings. In partnership
with industry and national laboratories, universities
can bring together experts from many disciplines to investigate
problems related to agency missions or meet
specific product/service goals. At the same time, university
students can learn systems thinking and gain
an understanding of market forces through internships
and participation in research projects.
In spite of severe fiscal constraints, several large
states have recognized that research and technologydevelopment
capacity are key elements in restoring
their economic prosperity in an intensely competitive,
global, technology-driven marketplace. California,
Texas, Ohio, Wisconsin, and other states have either
made or are planning to make major investments
in their research universities in specific technological
areas, including nanotechnology, biotechnology, and
information systems and communications (Ohio 3rd
Frontier Project, 2004; CAL-ISI, 2004; Seely, 2004; State
of Texas, 2004). The governor of Texas, for example,
recently announced plans to invest $150 million in regional
centers of innovation and commercialization to
house collaborative projects between universities and
private industry (State of Texas, 2004). In California,
centers have been created throughout the University of
California system to focus resources on advanced technology
development (CAL-ISI, 2004). Many other state
governments have acknowledged the importance of
technology-based economic development and the critical
role of universities, particularly schools of engineering,
in their economic development strategies.
Leadership in innovation will require commitments
and investments of funds and energy by the private
sector, federal and state governments, and colleges
and universities. Michigan can and must take control of
its destiny and conduct the necessary research, capture
the intellectual property, commercialize and manufacture
the products, and create the high-skill, high-value
jobs that define prosperity in a 21st-century knowledge
economy.
The Future of Public Higher Education
Higher education faces many challenges and opportunities
as it enters a new millennium. As The Economist
notes, the rise of the knowledge economy has driven
the democratization of higher education, as an ever
larger fraction of the workforce will need to have access
to postsecondary education. As knowledge has
replaced physical resources as the driver of economic
growth, universities have become the most important
engines of the knowledge economy. This is happening
throughout the world, not only in developed nations
in North America, Europe, and Asia, but in all regions–
developed, developing, and underdeveloped–aspiring
to prosperity and security in an intensely competitive
global, knowledge-driven economy. And here, market
competition extends far beyond traditional business
and trade to include knowledge resources such as human
capital, R&D, and innovation, all both key products
and assets of the contemporary university (The
Economist, 2005).
But this raises an important challenge to balance the
twin demands of mass access, necessary for a competitive
workforce, and excellence, necessary to provide the
new knowledge and innovation essential for a knowledge
economy. As The Economist notes, “We already
possess a successful model of how to organize higher

35
education: America’s. That country not only has almost
a monopoly on the world’s best universities, but
also provides access to higher education for the bulk of
those who deserve it. America’s system of higher education
is the best in the world. That is because there is
no system!” Governments play only a limited role, since
almost two-thirds of the support for American higher
education come from the private sector, e.g., tuition and
philanthropy, rather than federal or state government,
yielding a highly market-driven and diverse array of
colleges and universities, evolving and adapting to
serve the ever-changing and diverse needs of American
society. To conclude, The Economist stresses: “There is
no shortage of things to marvel at in America’s higher
education system, from its robustness in the face of external
shocks to its overall excellence. However what
particularly stands out is the system’s flexibility and its
sheer diversity.”
Key in the achievements of both excellence and access
in American higher education has been the public
university, which today educates 80% of all college
students. With an expanding population, a prosperous
economy, and compelling needs such as national security
and industrial competitiveness, the public was willing
to make massive investments in higher education
during the 20th century. While elite private universities
were important in setting the standards and character
of higher education in America, it was the public university
that provided the capacity and diversity to meet
our nation’s vast needs for postsecondary education.
Today, however, in the face of limited resources and
more pressing social priorities, this expansion of public
support of higher education has slowed. While the
needs of our society for advanced education will only
intensify as we evolve into a knowledge-driven world
culture, it is not evident that these needs will be met
by further expansion of our existing system of public
universities. The terms of the social contract that led to
these institutions are changing rapidly. The principle
of general tax support for public higher education as
a public good and the partnership between the federal
government and the universities for the conduct of basic
research are both at risk. These changes are being
driven in part by increasingly limited tax resources and
the declining priority given higher education in the face
of other social needs (Zemsky, 1998).
There is a paradox here. Both state governments and
the public at large call on public universities to achieve
greater access, quality, and cost savings. Yet they also
encourage–indeed, expect–them to draw an increasing
share of their resource base from non-state sources.
Public universities are challenged to demonstrate that
they are not solely dependent upon the state, that they
can increase faculty productivity and lower costs, all
the while improving educational quality. In a sense,
higher education funding policy in many states has
shifted from tax-support of the public university as a
public good to a philosophy of procuring low-cost educational
services (Slaughter, 1997).
Little wonder that public university leaders and
governing boards are increasingly reluctant to cede
control of their activities to state governments. Some
institutions are even bargaining for more autonomy
from state control as an alternative to growth in state
support, arguing that if granted more control over their
own destiny, they can better protect their capacity to
serve the public.
Most states are moving toward a revenue-driven,
market-responsive higher education system for two
key reasons: First, there is no way that a tax system can
support the massification of higher education required
by knowledge-driven economies, in the face of other
compelling social priorities (particularly the needs of
the aging). And second, there is a growing realization
that the way we currently finance public higher education
is highly regressive, essentially providing massive
subsidies for the rich at the expense of educational opportunity
for the poor.
Today, even as the need of our society for postsecondary
education intensifies, we also find erosion in the
perception of education as a public good deserving of
strong societal support (Zemsky, 2005). State and federal
programs have shifted priorities from investment in
the higher-education enterprise (appropriations to institutions)
to investment in the marketplace for highereducation
services (loans or tax benefits to students and
parents). Whether a deliberate or involuntary response
to the tightening constraints and changing priorities for
public funds, the new message is that education has become
a private good paid for by the individuals benefiting
most directly–the students. This shift from the perception
of higher education as a public good to an in-

36
dividual benefit has another implication. To the degree
that higher education was a public good, benefiting
all (through sustaining democratic values, providing
public services), one could justify its support through
taxation of the entire population. But viewed as an individual
benefit, public higher education is, in fact, a
highly regressive social enterprise since, in essence, the
poor subsidize the education of the rich, largely at the
expense of their own opportunities.
More precisely, if one views state support as providing
essentially the discounted price from the true costs
of the college education provided to state residents, one
might well question why this should be distributed
equally to all, rich and poor. If a fundamental objective
of public higher education is access to educational
opportunity, then a far more progressive social policy
would be to distribute the state subsidy based on need,
either through charging tuition prices closer to the true
cost of an education and using state funding to provide
need-based financial aid, or by setting tuition levels
based on the ability to pay, with the consequent discount
covered by state support–so-called high-tuition,
high-financial-aid policies. This will clearly require a
different social contract between the state and its public
universities (Newman, 2004).
A New Social Contract
Even more fundamentally, as we enter the new millennium,
there is an increasing sense that the social contract
between the university and American society may
need to be reconsidered and perhaps even renegotiated
once again. In an age of knowledge, it has become the
responsibility of democratic societies to provide their
citizens with the education and training they need,
throughout their lives, whenever, wherever, and however
they desire it, at high quality and at an affordable
cost.
Of course, this has been one of the great themes of
higher education in America. Each evolutionary wave
of higher education has aimed at educating a broader
segment of society, at creating new educational forms to
do that—the public universities, the land-grant universities,
the normal and technical colleges, the community
colleges, and today’s emerging generation of cyberspace
universities. But we now will need new types of
colleges and universities with new characteristics:
1. Just as with other social institutions, our universities
must become more focused on those we serve.
We must transform ourselves from faculty-centered
to learner-centered institutions, becoming more responsive
to what our students need to learn rather
than simply what our faculties wish to teach.
2. Society will also demand that we become far more
affordable, providing educational opportunities
within the resources of all citizens. Whether this occurs
through greater public subsidy or dramatic restructuring
of the costs of higher education, it seems
increasingly clear that our society—not to mention
the world—will no longer tolerate the high-cost,
low-productivity paradigm that characterizes much
of higher education in America today.
3. In an age of knowledge, the need for advanced education
and skills will require both a personal willingness
to continue to learn throughout life and a commitment
on the part of our institutions to provide
opportunities for lifelong learning. The concepts of
student and alumnus will merge.
4. Our highly partitioned system of education will
blend increasingly into a seamless web, in which
primary and secondary education; undergraduate,
graduate, and professional education; on-the-job
training and continuing education; and lifelong enrichment
become a continuum.
5. Already we see new forms of pedagogy: asynchronous
(anytime, anyplace) learning that utilizes
emerging information technology to break the constraints
of time and space, making learning opportunities
more compatible with lifestyles and career
needs; and interactive and collaborative learning
appropriate for the digital age, the plug-and-play
generation. In a society of learning, people would
be continually surrounded by, immersed in, and
absorbed in learning experiences, i.e., ubiquitous
learning, everywhere, every time, for everyone.
6. The great diversity characterizing higher education

37
in America will continue, as it must to serve an increasingly
diverse population with diverse needs
and goals. But it has also become increasingly clear
that we must strive to achieve diversity within a
new political context that will require new policies
and practices.
It is clear that the access to advanced learning opportunities
is not only becoming a more pervasive need,
but it could well become a defining domestic policy issue
for a knowledge-driven society. Higher education
must define its relationship with these emerging possibilities
in order to create a compelling vision for its
future as it enters the new millennium.
Over the Horizon
As we look even further into an unknowable future,
the possibilities and uncertainties become even more
challenging. How will wealth be created and value
added, in this global, knowledge-driven economy
While many regions (e.g., Bangalore, Shanghai) will
prosper with exceptionally high-quality specialization
in knowledge-intensive services and low cost commodity
manufacturing, the United States is unlikely to be
competitive here, whether because of our high standard
of living (and high wage) requirements or population
limitations. Instead we will have to stress our capacity
to innovate and create, derived from an unusually diverse,
market-driven, democratic culture. Although we
will still “make things,” we will do so by organizing the
financial and human capital on a global level.
Will increasingly robust communications technologies
(always on, always in contact, high-fidelity interaction
at a distance) stimulate the evolution of new
types of communities (e.g., self-organization, emergence,
collective intelligence, “hives”) Suppose infobio-nano
technologies continue to evolve at the current
rate of 1,000-fold per decade. Can we really prepare
today’s kids for the world of several decades from now
when technologies such as neural implants, AI “mind
children”, stim-sim, and such may actually exist During
the 20th century, the lifespan in developed nations
essentially doubled (from 40 to 80 years). Suppose it
happens again in the 21st century
More generally, it is clear that as the pace of change
continues to accelerate, learning organizations and systems
will need to become highly adaptive if they are
to survive. Here, we might best think of future learning
environments as learning ecologies that, like natural
ecologies, not only adapt but mutate and evolve to
serve an ever-changing world.
So what might we anticipate as possible future
forms of the university The monastic character of the
ivory tower is certainly lost forever. Although there are
many important features of the campus environment
that suggest that most universities will continue to exist
as a place, at least for the near term, as digital technology
makes it increasingly possible to emulate human
interaction in all the sense with arbitrarily high fidelity,
perhaps we should not bind teaching and scholarship
too tightly to buildings and grounds. Certainly,
both learning and scholarship will continue to depend
heavily upon the existence of communities, since they
are, after all, highly social enterprises. Yet as these communities
are increasingly global in extent, de-tached
from the constraints of space and time, we should not
assume that the scholarly communities of our times
would necessarily dictate the future of our universities.
For the longer term who can predict the impact of
exponentiating technologies on social institutions such
as universities, corporations, or governments, as they
continue to multiply in power a thousand-, a million-,
and a billion-fold
The growing and changing nature of higher education
needs will trigger strong economic forces. The
weakening influence of traditional regulations and the
emergence of new competitive forces, driven by changing
societal needs, economic realities, and technology,
are likely to drive a massive restructuring of the highereducation
enterprise. From our experience with other
restructured sectors of the economy such as health care,
transportation, communications, and energy, we can
expect to see a significant reorganization of higher education,
complete with the mergers, acquisitions, new
competitors, and new products and services that have
characterized other economic transformations. More
generally, we may well be seeing the early stages of the
appearance of a global knowledge and learning industry, in
which the activities of traditional academic institutions
converge with other knowledge-intensive organizations
such as telecommunications, entertainment, and

38
information service companies (Peterson, 1997).
Many undoubtedly would view with derision or
alarm the depiction of the higher-education enterprise
as an “industry” or “business.” After all, higher education
is a social institution with broader civic purpose
and has not traditionally been driven by concerns
about workforce training and economic development.
Furthermore, the perspective of higher education as
an industry raises concerns that short-term economic
and political demands will dominate broader societal
responsibilities and investment. Yet in an age of knowledge,
the ability of the university to respond to social,
economic, and technological change will likely require
a new paradigm for how we think about postsecondary
education. No one, no government, is in control of the
emerging knowledge and learning industry; instead it
responds to forces in the marketplace. Universities will
have to learn to cope with the competitive pressures of
this marketplace while preserving the most important
of their traditional values and character.
Today the higher-education enterprise consists of a
constellation of traditional institutions, research universities,
four-year colleges and universities, two-year colleges,
proprietary institutions, and professional and specialized
institutions. However the postsecondary enterprise
of tomorrow will also contain computer hardware
and software companies, telecommunications carriers,
information services companies, entertainment companies,
information resource organizations, and corporate
and governmental educational organizations.
Yet, regardless of who or what drives change, the
higher education enterprise is likely to be dramatically
transformed over the next decade. In this rapidly
evolving knowledge business, the institutions most at
risk will not be of any particular type or size but rather
those most constrained by tradition, culture, or governance.
In many ways the education industry represents
the last of the economic sectors dominated by public
control and yet at risk because of quality, cost-effectiveness,
and changing demands. As information technology
breaks apart monopolies and opens up the market
by releasing students from the constraints of space and
time, competition between both existing and newly
emerging institutions is intensifying. Just as with health
care, the higher-education enterprise is entering a period
in which market forces could well lead to massive
restructuring.
To view higher education only from the perspective
of its traditional constituencies, however, is to miss the
point of the transformation that must occur as we enter
an age of knowledge. For example, if lifetime education
becomes a necessity for job security—as it has
in many careers already—the needs for college-level
education and training will grow enormously. So too
American higher education could well be one of this
nation’s most significant export commodities, particularly
if we can take advantage of emerging technologies
to deliver high-quality educational services on a global
scale. Higher education could be—should be—one of
the most exciting growth industries of our times, but
this will depend on the development of new models of
higher education that utilize far more effective systems
for financing and delivering learning services.
A Vision for Michigan’s Future: A Knowledge Society
Lifelong access to advanced educational opportunities
will become the defining domestic policy issue for
a knowledge-driven society. This will clearly require the
development of new paradigms for delivering education
to even broader segments of our society, perhaps
to all of our society, in convenient, high-quality forms,
at a cost all can afford. Fortunately, today’s technology
is rapidly breaking the constraints of space and time. It
has become clear that most people, in most areas, can
learn and learn well using asynchronous learning, that
is, “anytime, anyplace, anyone” education. Lifetime
education is rapidly becoming a reality, making learning
available for anyone who wants to learn, at the time
and place of their choice, without great personal effort
or cost. With advances in modern information technology,
the barriers in the educational system are no longer
cost or technological capacity but rather perception and
habit.
But this will not be enough. We should instead consider
a future of “ubiquitous learning”—learning for
everyone, every place, all the time. Indeed, in a world
driven by an ever-expanding knowledge base, continuous
learning, like continuous improvement, has become
a necessity of life. Rather than an age of knowledge, we
should instead aspire to a society of learning, in which

39
people are continually surrounded by, immersed in,
and absorbed in learning experiences. Information
technology has now provided us with a means to create
learning environments throughout one’s life. These
environments are able not only to transcend the constraints
of space and time, but they, like us, are capable
as well of learning and evolving to serve our changing
educational needs. Both governments and higher education
must define their relationship with these emerging
possibilities in order to create a compelling vision
for its future as it enters the next millennium.
While some may continue to debate, to suggest that
the status quo will remain intact, to others the choice
has become clear. We can either accept the risks and
the uncertainties of attempting to transform the higher
education enterprise to serve a changing society with
new needs and new imperatives. Or we can wait for
the market to reshape our institutions, perhaps even
relegating them to a backwater role in the emerging
global knowledge economy. Clearly, embracing the status
quo, treading water, also has very real risks. After
all, there are many commercial sharks swimming just
below the surface.
Here it is important to stress once again that while
America’s colleges and universities may indeed evolve
as a component of a global knowledge and learning
industry, it would be both misleading and dangerous
to view higher education through an industrial model.
Universities serve broader civic purposes such as transmitting
our cultural heritage and undergirding our democracy,
purposes essential to recognize and preserve,
and yet highly vulnerable to market forces. Furthermore,
most will acknowledge that the conventional university
campus provides a unique and extraordinarily
rich environment for learning and scholarship. But if
market forces alone are allowed to determine the future
of higher education, we could well find ourselves facing
a future in which only the rich and privileged would
have the opportunity for campus-based learning, while
the majority of our population would be relegated to
media-based, standardized educational experiences.
The learners of our future society will demand that
their educational experiences prepare them for a lifetime
of learning opportunities, fused both with work
and with life. They will seek just-in-time and just-foryou
learning through networked organizations. They
will seek the integration of timeless and timely knowledge.
The systems of higher education that emerge in the
decade ahead will almost certainly be far different from
today’s. Higher education will either transform itself or
be transformed as financial imperatives, changing societal
demands, emerging technologies, and new competitors
reshape the knowledge enterprise, changing
in the process how colleges and universities organize
and deliver learning opportunities as well as how they
structure and manage their institutions.
For most of our history, the growth of higher education
in America has been sustained by tax dollars,
either directly through state or federal appropriation,
or indirectly through favorable tax policy. As a result,
higher education has been strongly shaped by public
policies and public agendas, from Jefferson’s writings
to the land-grant acts, from the GI Bill to Pell Grants,
from the government-university research partnership
to the Equal Opportunity Act. Public investment has
both determined and protected the public purpose of
higher education in America.
Today, however, there is an increasing sense that the
growth of higher education in the 21st century will be
fueled by private dollars. Public policy will be replaced
increasingly by market pressures. Hence the key question:
Will leaders of government and higher education
attempt to use public policy and public investment to
shape global knowledge and learning marketplace to
preserve the important values, traditions, missions, and
purpose of the university Or will they continue to burden
these institutions with archaic, politically motivated,
and cumbersome policies and regulations, crippling
higher education’s capacity to adapt to the realities of
the marketplace and serve society in the dramatically
different circumstances of an age of knowledge.

40
Michigan Tomorrow
A Digital “Catholepistimead” or “Society of Learning
The World
The Region (Great Lakes)
UM, MSU
Universitas
Colleges and Universities
Gymnasia
Schools
Corporate R&D centers
High tech startups
Knowledge networks
UM, MSU
The State
Families
The Nation
Cyberinfrastructure
Michigan Broadband
Internet2, National Lamba Rail, Sakai
Digital Libraries, the Google Project
Virtual Universities, Global Universities

41
Chapter 5
How Far Do We Have To Go: A Gap Analysis
In this chapter we turn to a consideration of the road
ahead, how far Michigan must travel in order to build
a knowledge society capable of facing the imperatives
of the 21st-century global economy. We will continue
following the roadmapping process by utilizing a gap
analysis to compare where Michigan is today with what
it must become tomorrow. In this effort, we must continue
to bear in mind that in the flat world of a global,
knowledge-driven economy, the key to prosperity lies
not in low taxes, cool cities, and great weather. Rather it
requires educated people, new knowledge, innovation,
and an entrepreneurial spirit. This, in turn, requires visionary
public policies and public and private investments
that look toward the future rather than clinging
to the past. The challenge to Michigan, its public leaders,
its business, industry, and labor, its educational and
cultural institutions, and its citizens is to invest in the
production of the human capital, infrastructure, new
knowledge, and innovation necessary to achieve prosperity
and social well-being in a 21st-century world.
By any measure, the assessment of Michigan today
provided in Chapter 3 is very disturbing. Our state is
having great difficulty in making the transition from a
manufacturing to a knowledge economy. In recent years
we have led the nation in unemployment; the out-migration
of young people in search of better jobs is the
fourth most severe among the states; our educational
system is underachieving with one quarter of Michigan
adults without a high school diploma and only onethird
of high school graduates college-ready. Although
Michigan’s system of higher education is generally regarded
as one of the nation’s best, the erosion of state
support over the past two decades and most seriously
over the past four years has not only driven up tuition
but put the quality and capacity of our public universities
at great risk.
More generally, for many years Michigan has been
shifting public funds and private capital away from investing
in the future through education, research, and
innovation to fund near-term obligations such as prisons
and Medicaid, even as it reduced state revenues
still further through tax cuts. And all the while, as the
state budget began to sag and eventually collapsed in
the face of a weak economy, public leaders were instead
preoccupied with fighting the old and increasingly irrelevant
cultural and political wars (cities vs. suburbs
vs. exurbs, labor vs. management, religious right vs.
labor left). Preoccupied with the political rhetoric and
social demands of the past, Michigan has been consuming
its seed corn for its future.
Yet our state is not alone. Although many current
measures of technological leadership—the percentage
of gross domestic product invested in R&D, absolute
numbers of researchers, labor productivity, high-technology
production and exports—still favor the United
States, a closer look reveals a mosaic of concerns suggesting
that our nation may have difficulty maintaining
its global leadership in innovation over the long
term. These well-documented trends include: (1) a
large and growing imbalance in federal research funding
between the engineering and physical sciences on
the one hand and biomedical and life sciences on the
other; (2) increased emphasis on applied R&D in industry
and government-funded research at the expense
of fundamental long-term research; (3) erosion of the
engineering research infrastructure due to inadequate
investment over many years; (4) declining interest of
American students in science, engineering, and other
technical fields; and (5) growing uncertainty about the
ability of the United States to attract and retain gifted
science and engineering students from abroad at a time
when foreign nationals account for a large, and productive,
component of the U.S. R&D workforce.
From this perspective, the vision we have proposed
for Michigan tomorrow seems very distant indeed.

42
Michigan’s Challenge: Economic Transformation
Today Michigan is experiencing a transition to a
postindustrial society as fundamental as the transformation
from a farming society to an industrial society
a century ago, driven by the emergence of an economy
based on knowledge—educated people and their
ideas–powered by breathtakingly rapid development
of new technologies; the globalization of the world’s
economy and culture enabled by technologies of communication
and travel; and the demographic changes
in the American population bringing hitherto underrepresented
groups into a majority of the workforce.
Too many of our people and our institutional leaders
are floundering, on the defensive, desperately clinging
to the past, to the habits and expectations of an earlier
era when we were a leading industrial power not just of
America but of the entire world. Many among us look
for scapegoats—foreign workers and industries, immigrants,
business, labor, politicians, ...even universities.
Some take a “this too shall pass” attitude, almost as if
by closing our eyes we could make change stop. Others
demand entitlements, no longer secure in a rapidly
changing world.
To be sure, economic and social upheaval of the
magnitude we are living through is unprecedented. It
challenges our basic assumptions about how we are to
live our lives; it changes the rules in mid-game. It displaces
and hurts far too many. But the almost certain
consequence of this continuing widespread denial of
and resistance to change would be to condemn Michigan
to a future of decline that would soon be irreversible.
Why Because such denial violates a fundamental
law of nature that all living systems must continually
adapt to their changing environment or risk extinction.
To survive let alone prosper, Michigan has to summon
the courage and strength to face up to reality, to see
change not as a threat but to seize the opportunities it
offers to make a better world for ourselves and our children.
Today we find Michigan midway through very difficult
transition from an industrial into a knowledge
economy. We’re learning the hard way that if we want
to fully prosper in this new world, we must take the
long view, invest in people and learning institutions—
in making available life-long education and training
and similarly invest in research and the technological
innovation it produces. Michigan’s major sectors—government,
business, and labor–must be dramatically restructured
to serve us better in the new century. Michigan
today faces fiscal collapse as we continue to fund
our current needs and desires by shifting the cost to
future generations.
Today and in the future, it is people, their character,
knowledge, skill, and ability to innovate, that when allied
with developing technologies, give us the competitive
edge in the world economy. The keys to economic
growth are education and innovation, not tax cuts and
entitlements. Glazer and Grimes state it well: “These
days the keys to economy success are a well-educated
workforce, technical know-how, high levels of capital
investment, and entrepreneurial zeal–all of which
countries can acquire with the help of supportive governments,
multinational firms, and international investors.
If the United States is to meet the challenge posed
by a truly global economy, it will have to insure that
its scientists are the most creative, its business leaders
are the most innovative, and its workers are the most
highly skilled–not easy when other nations are seeking
the same goals” (Glazer, 2004). And such is also the important
lesson for our state.
Michigan also must make additional investments
to create the new jobs to employ better educated graduates.
Thus far, too few jobs of this kind—dependent on
skill and knowledge–exist in our state. The old economy
is gone, never to return. Furthermore, even if our
traditional industries made something of a comeback in
the 1990s, they can never dominate our economy again.
The productivity gains made through efforts such as total
quality management and lean manufacturing unfortunately
come at the expense of jobs–and perhaps also
at the expense of the R&D necessary to achieve technological
innovation and sustain market share.
It seems increasingly clear that new jobs in Michigan
are not going to be spawned by existing industry
but instead will be created by entirely new activities dependent
upon technological innovation, both in hightech
areas such as biotechnology, information technology,
and nanotechnology, and in knowledge intensive
services. They will require skilled knowledge -workers,
technological innovation, and energetic, risk-taking
entrepreneurs. And it is from this perspective that the

43
most significant players in building Michigan’s new
economy could well turn out to be its colleges and universities,
since these institutions are the primary source
of all three essential elements of the knowledge economy.
Yet it is from this perspective that Michigan may be
at the greatest risk, since for too long it has taken public
higher education–perhaps the most critical assets of the
knowledge economy–for granted.
Higher Education in Michigan:
A Critical Asset at Great Risk
Study after study have highlighted the importance
of higher education to the future of Michigan. Most recently,
the University Investment Commission, chaired
by former Speaker of the Michigan House of Representatives
Paul Hillegonds, stressed that “For every problem
facing Michigan—the need for high quality and
affordable health care, stronger K-12 student achievement,
more and better-paying jobs, environmental
protection, agricultural productivity, and urban revitalization—public
universities contribute to solutions
through leadership, talented graduates, loan of academic
talent, and research” (PCSUM, 2003).
The Commission went further, noting that in a future
in which skills, knowledge, and technology will
determine economic success, higher education not only
provides the key educational opportunities so necessary
for a high quality of life, but also the production of
new knowledge through research and entrepreneurial
stimulus and innovation necessary for new industry.
Moreover, talented faculty and students, companies,
and highly skilled workers from all over the world come
to Michigan to be on or near our campuses. Universities
are essential to cultural life in our state, contributing
the intellectual stimulation from their educational and
scholarly activities, and adding to the quality of life in
Michigan through their performing and visual arts (not
to mention the entertainment provided through their
athletic programs).
Many other studies have agreed that the single
most important investment that state government
could make in the future of Michigan is to invest in the
state’s public colleges and universities. Since these will
be the key source of an educated workforce, research
and innovation, and entrepreneurial activity, these
should be at the top of the state’s priority list. There is
already strong evidence of this new reality. A study by
the Stanford Research Institute (SRI, 2002) estimated in
1999 that the state’s investment of $1.5 billion in public
higher education generated $39 billion in economic impact–over
12% of our gross state product–a multiplying
factor of 25-fold, clearly unmatched by any other state
investment.
Yet, ironically, there continue to be signs that state
leaders still do not recognize the importance of Michigan’s
colleges and universities as a strategic investment,
either in the magnitude or the nature of the deployment
of public funding relative to other states. Over the past
five years, Michigan’s public universities have suffered
massive cuts in state appropriations, with most universities
seeing reductions in state support per student of
25% to 40% during this period, ironically at a time when
enrollments have been increasing.
Michigan today spends an average of $5,600 a year
on a public university student compared with an average
of $7,300 for each K-12 student (Boulus, 2005). But
even more disturbing is that after a prison building
boom in the 1980s, today Michigan spends almost 30%
more on locking people up ($1.9 billion, corresponding
to $30,000 per inmate) than it does on educating them
in our public colleges and universities, a truly tragic
statement of our state’s priorities (Milliken, 2005).
More specifically, appropriations to Michigan’s
public universities have declined from $1.62 billion in
FY2002 to $1.43 billion in FY2005, with further budget
cuts on the horizon in FY2006. State appropriations per
student have dropped from $6,840 to $5,600 over this
period, amounting to a 25% loss in state support when
inflation adjusted. This level of state support not only
has fallen into the bottom third in the nation, but Michigan
ranks at the bottom of the Great Lakes states, which
average $6,735. In fact, over the past two years alone,
the state has cut $260 million from the higher-education
budget, an amount equal to the combined support of
seven state universities, forcing the elimination of 2,000
university jobs and denying the opportunity for a college
education to many thousands of students.
During much of this period, state universities
strained to hold tuition increases in check. In fact, when
financial aid is included, the net tuition levels for pub-

44
lic higher education in Michigan have actually declined
over the past decade (PCSUM, 2004). But with the most
recent cuts, occurring after state government abrogated
an earlier agreement to restore funding cuts if the universities
would hold tuition increases below inflation,
the universities had no choice but to begin to raise tuition
levels at double-digit rates. Perhaps indicative of
state government’s myopia, the governor blasted these
tuition increases, pandering to the fears of students and
parents, even as state government was planning to cut
higher education still further.
More specifically, while all of the state’s public universities
have seen declines in inflation-adjusted state
appropriation of 25% or more, Michigan’s research
universities have been particularly hard hit. Because of
strong enrollment increases, Michigan State University
has seen an effective decline of 40% in state support.
State support of the University of Michigan’s Ann Arbor
campus has now declined to less than 7% of its operating
budget.
Michigan also lags far behind other states in providing
state support of needed academic buildings on university
campuses. Since the 1980s, there has been relatively
little state capital outlay for higher education. In
fact, the state has currently seen a decade-long drought
with no appreciable funding of university facilities,
ranking Michigan lowest in the nation in this important
criterion.
Today there are increasing signs that both the quality
and capacity of Michigan’s public universities are
beginning to suffer, at just that moment when the challenges
of a global, knowledge-driven economy have
positioned our universities as among our most important
assets. Student-to-faculty ratios and workloads
have been increasing, eroding not only the quality of
classroom instruction but also constraining research
university faculty from conducting the research critical
to economic development in a knowledge economy
increasingly dependent upon technological innovation.
Faculty salaries at our public universities have fallen
20% behind those at private universities (compared to
1980 when they were roughly even), leading to a migration
of some of the best professors from public to
private institutions. Other erosion has occurred in the
value of pension plans, medical benefits, life insurance,
housing, and other benefits key to faculty recruiting
and retention (Kane, 2003).
The harsh manner in which state government has
treated higher education in recent years demonstrates
in a convincing fashion that our public leaders simply
don’t get it. They fail to understand the imperatives of
the new economy for Michigan’s future. But even in the
short term, considering the economic impact of Mich-

45
igan’s colleges and universities, cutting higher education
is clearly penny-wise and pound-foolish! Michael
Boulos, executive director of the President’s Council
of State Universities of Michigan, captured the sense
of most Michigan’s higher education leaders when he
warned, “The state is not living up to its responsibilities
to students, their families, or Michigan’s future. Without
top-flight universities, our state will be unable to
make the transition from a brawn to a brain economy
and draw the intellectual talent necessary to attract new
companies to Michigan” (Boulus, 2005).
Little wonder that after the cavalier treatment higher
education has received from state leaders over the
past several years, the governing boards with fiduciary
responsibility for the welfare of Michigan’s public universities
have begun to lose confidence in state government
as a reliable partner in providing adequate support
for this critical state asset. Term-limited legislators and
governors, political parties controlled by narrow special-interest
groups, and a body-politic addicted to an
entitlement economy simply cannot be trusted. Instead,
governing boards are relying more heavily on the autonomy
provided by the state constitution, which gives
them control over decisions such as admission, tuition
and fees, faculty and staff compensation, procurement,
and other areas sometimes micromanaged by state government.
In fact, as a consequence of inadequate state
support, several of Michigan’s public universities are
rapidly becoming predominantly “privately financed
public universities,” facing the challenge of sustaining
their public purpose and service to Michigan citizens
by competing in the marketplace rather than depending
primarily upon adequate state support.
The declining confidence in the will of state government
to adequately support education has motivated
a coalition of concerned citizens to launch an initiative
to force the Michigan State Legislature to consider legislation
that would lock in to the state budget annual
funding increases at the inflation rate for K-16 public
schools, colleges, and universities. The K-16 Coalition
for Michigan’s Future has notified the Legislature that
if they fail to pass this initiative, they are prepared to
bypass them and go directly to the voters on the 2006
ballot. In view of the unwillingness of state government
to adequately fund public higher education in the state
in recent years, such a voter-driven initiative may be
the only way to break the political logjam and begin
to re-invest in the state’s future, even if it would likely
force the state to adopt tax increases to adequately fund
education. (K-16 Coalition, 2005).
Broader Human Capital Concerns
As we have noted in Chapter 3, Michigan faces serious
challenges in producing the human capital–the
educated population, the knowledge workers, the scientists,
engineers, and other professionals–that will enable
it to compete. Not only is our population aging,
but the out-migration of our 25- to 44- year old population–the
fourth most severe among the states–creates a
brain drain with very serious implications. To be sure,
our educational institutions have demonstrated the
capacity to compensate to some degree by utilizing
their quality and reputation to attract and retain both
their graduates and those they attract from around the
world. Yet all too often, state politicians object to Michigan
universities enrolling students from other states or
nations, apparently oblivious to the fact that over the
longer term, the capacity of our academic institutions
to attract talented students, knowledge workers, and
companies from around the world is of extraordinary
importance to our state.
Equally disturbing is the clear failure in achievement
at all levels of our educational system. The performance
of our K-12 system over the past several decades has
been inadequate, as evidenced by the fact that almost
half of all Michigan adults are currently hindered by a
literacy level too low to function adequately in today’s
knowledge-driven society. Furthermore, one-quarter of
Michigan citizens do not have a high school diploma,
while only one-third of high school students graduate
with college-ready transcripts (Austin, 2004). Although
Michigan’s system of higher education is generally regarded
as one of the nation’s best, here too there are
challenges. Although our two flagship universities, UM
and MSU, have high graduation rates (90% and 70%,
respectively), the rest of Michigan’s public universities
graduate fewer than 50% of their students (corresponding
to roughly 300,000 Michigan students that will enter
college only to fail to graduate).
Hence there is growing evidence that a skilled-worker
shortage–created by low birthrates, out-migration of

46
young adults, and poor performance of our educational
systems–poses a serious threat. Beyond these current
challenges, it is also the reality that a global, knowledge-driven
economy is continuing to raise the bar for
educational achievement. In sharp contrast to a recent
state report which suggested that “a vast majority of
the emerging high-wage, high-skilled jobs available in
Michigan require a level of skill that can be obtained
at the community college or technical school level and
do not require a bachelor’s degree” (MEDC, 2002), the
reality is that a bachelor’s degree is already almost a
mandatory credential for a job in the new economy,
and soon advanced degrees–or at least lifelong learning–will
become a necessity.
We must take great care not to repeat the mistakes
of the 20th century when we doomed generations to
poverty by restricting their educational opportunities
to only the level they needed for the low-skilled jobs
of that time. The educational demands of a changing
world are moving ever higher.
The Production of New Knowledge:
Research and Innovation
New jobs in Michigan are not going to be spawned
by existing industry but instead will be created by entirely
new activities, e.g., biotechnology, information
technology and computer networking, lasers and ultrahigh-speed
technology, and an array of knowledge-intensive
services such as systems integration and software
development. These new jobs will be created by
innovation based on research and development and
requiring post-graduate education at the masters and
doctorate level.
It is estimated the average rate of return on capital
investment in the United States today ranges from 10%
to 14%. In contrast, the private rate of return of R&D
investments is now estimated to be 25% to 30%, twice
as high. Furthermore, the social rate of return of R&D
investments, that is the rate of return that accrues not
just to one firm, but to many firms, industries, and consumers
in the society, is typically 50% to 60%, almost
four times the rate for other types of investment (NSB,
2004)
From this perspective, it is clear that the most powerful
economic engines in Michigan may well turn out
to be its public research universities. Why Because the
key ingredients in technology-based economic development
are technological innovation, technical manpower,
and entrepreneurs. Research universities produce all
three. Through their on-campus research, they generate
the creativity and ideas necessary for innovation.
Through their faculty efforts, they attract the necessary
“risk capital” through massive federal R&D support.
Through their education programs they produce the
scientists, engineers, and entrepreneurs to implement
new knowledge. And they are also the key to knowledge
transfer, both through traditional mechanisms,
such as graduates and publications, and through more
direct contributions such as faculty/staff entrepreneurs,
the formation of start-up companies, strategic partnerships,
and so on.
There is ample evidence to support the impact of
world-class research universities. We need only look
at MIT’s impact on the Boston area, Stanford and UC-
Berkeley’s impact on Northern California, Caltech’s
impact on Southern California, and the University of
Texas’ impact on Austin. These successful examples offer
an important lesson. Only world-class research universities
are capable of major impact through technology-driven
economic development. A university must
be able to play in the big leagues, to compete head-tohead
with institutions such as MIT, Stanford, and Berkeley–as
well as Beijing’s Tsinghua University, France’s
Ecole Polytechnic, Germany’s Max Planck Institutes,
and India’s IITs–if it is to attract the outstanding faculty
and students and massive resources necessary for
technological leadership. Fortunately, today Michigan
already has two world-class research universities, the
University of Michigan and Michigan State University,
along with other universities (Wayne State University,
Michigan Technological University, and Western Michigan
University) with considerable activity in research
and graduate education, that could serve as the source
of new knowledge, innovation, and entrepreneurs necessary
to act as powerful job creation machines. The
state need only support them adequately.
Yet there are several particular caveats. The first concerns
the imbalance in R&D investments in our state.
In decades past, largely because of the great prosperity
of Michigan’s manufacturing industry in the automotive
sector, our Michigan Congressional delegation had

47
relatively little incentive to go after the massive federal
investments in R&D sought by other states, preferring
instead to give priority to protecting Michigan industry
from intrusive federal regulation. Hence the massive
federal investments in R&D facilities stimulated by
the Cold War flowed to other states such as California
and Texas, leaving Michigan behind and ranked at the
bottom of the states both in return of federal tax dollars
and in federal R&D. Today we suffer from this past
practice, since most of Michigan’s industrially funded
R&D tends to be aimed at product development rather
than the cutting-edge basic research funded by the federal
government (Gray, 2005).
Second, it is important to recognize that while research
and scholarship are appropriate activities for all
universities, in truth a state can afford only a limited
number of world-class research universities capable of
competing for the very best students, faculty, and public
and private support. David Ward, former chancellor
of the University of Wisconsin and a distinguished
geographer by discipline, estimates that it takes the tax
base provided by a population of 5 million to support
a single public research university of world-class quality,
perhaps best measured by membership in the Association
of American Universities (AAU). This rule
of thumb appears to work in most states–and most nations–e.g.,
Wisconsin with its one AAU-class university
in Madison, California with the six AAU campuses of
the University of California, and Michigan, with its two
AAU campuses in Ann Arbor and East Lansing. There
is ample evidence that political attempts to feed ambitious
attempts at mission creep are not only doomed
to failure, but this tendency creates a leveling effect in
which all institutions are pushed toward a least common
denominator of quality.
Third, it is important to deploy public resources in
both a visionary and effective manner. For example,
while the Life Sciences Corridor, funded by a portion
of Michigan’s tobacco-settlement funds, has been promoted
as “a billion-dollar investment” in life sciences
research, in reality, the $30 million generated annually
for this purpose is modest in scope compared with both
federally funded research in Michigan universities in
biomedical research (currently over $400 million annually)
and industrial R&D investment in Michigan
laboratories such as Pfizer in Ann Arbor ($1 billion annually).
Further, it falls considerably short of the investments
that other states are making in R&D activities at
their research universities, e.g., California’s commitment
of $300 million to build several major research
centers on its university campuses or the successful referendum
to commit $3 billion over the next ten years
for stem cell research.
Finally, while it is true that the soaring commercial
value of the intellectual property produced through
academic research holds great potential for economic
development, particularly in the life sciences and information
technology, it also poses risks. The lure of
riches has stimulated many universities to adopt aggressive
commercialization policies and to invest heavily
in technology transfer offices to encourage the development
and ownership of intellectual property that
sometimes interfere with the traditional open sharing
of scholarly results with the broader scientific community
(Press, 2000).
Entrepreneurs, Startups, and
High-Tech Economic Development
Although Michigan is fortunate in having a high
quality higher education system, including two worldclass
research universities, it has not benefited from
high-tech economic development to the degree of other
regions such as Austin, San Diego, or Seattle. This failure
has not been for lack of trying. Faculty members
with strong entrepreneurial experience have been recruited
from high tech communities. Management talent
has been lured to the state to lead startup efforts.
Universities have invested their own resources in areas
such as the life sciences and information technology
with regional economic development as an objective.
Yet still technology-driven economic development has
not taken off. Why
In part it is due to climate. No, not the weather in
“good, gray Michigan,” but rather the economic culture–the
availability of venture capital funds, a risk-taking
philosophy on the part of financial institutions, and
a network of entrepreneurs. Michigan does not benefit
from the level of available investment capital characterizing
other regions such as California or Texas. Furthermore
its industrial and political culture continues
to be driven very much by the automobile industry and

48
dominated by companies that are not knowledge-driven
but instead dependent on mature technologies.
It is interesting to compare Michigan with the experience
of other more successful regions such as Boston’s
Route 128, North Carolina’s Research Triangle, San Diego,
and Austin. Just as “all politics is local,” one could
maintain that “all high-tech economic development is
regional.” In each of these success stories, the trigger
event was the spinoff startup company from faculty
research at a world-class university that was wildly
successful, creating the wealth (and the wealthy entrepreneurs)
that could be plowed back as venture capital
into the next round of startups, e.g., DEC (Ken Olsen) in
Boston, SAS (Jim Goodnight) in North Carolina, Qualcomm
(Irwin Jacobs) in San Diego, and Dell Computers
(Michael Dell) in San Diego. There were notable differences,
of course. The Austin miracle involved a partnership
between the University of Texas and state government,
along with public funding, to attract key research
organizations (the Microelectronics and Computer Corporation
and Semitech); San Diego relied primarily on
private capital; Stanford and Austin both made a strategic
asset of their substantial land holdings.
However at the core of all of these efforts were
world-class research universities that served as magnets
to attract top talent, along with the high quality of
life characterizing their surrounding communities that
kept talent in the region. These universities were characterized
both by focused excellence, as well as intellectual
breadth that allowed them to span many fields,
engaging in both basic and applied research of the
highest quality. In each case, university, industry, and
government leadership were well aligned and capable
of working together at the highest level. Each situation
began with a “big hit” that then provided both the role
model and the venture capital stream for subsequent
startups.
There is one more key feature of these success stories
that may explain much of the frustration occurring
today in university-industry relations. In each case,
ownership of key intellectual property was critical to
attracting the necessary private capital for successful
startups. Both universities and faculty entrepreneurs
were aggressive in capturing and retaining intellectual
property rights. An interesting counter example is provided
by Johns Hopkins University, which developed
an important cancer treatment drug during the same
period as these other economic success stories, but in
altruistic fashion, decided it was too important to restrict
the drug through patents and instead put it into
the public domain, thereby undercutting further economic
development in the Baltimore area.
The research universities in these high-tech hot
spots have embraced a sophisticated, nonlinear model
of knowledge transfer, where they increasingly view
their primary missions–and their greatest rewards–as
creating new industries rather than supporting old
companies. Clearly, these universities see their greatest
value to society and their greatest institutional payoff
in Schumpeter’s “creative destruction,” building the
new industries that will eventually devour the old.
Little wonder then that established companies seeking
cooperative relationships are increasingly frustrated
by the priorities such universities give to spinoffs and
startups requiring aggressive negotiations to retain the
intellectual property rights necessary to attract private
investment. Although some companies have adopted a
near-term strategy of off-shoring their R&D activities
to nations with less aggressive intellectual property demands,
over the longer term this will deprive them of
access to many world-class research universities.
More cynically, one might even question the strategy
that many established companies have adopted
to dismantle their own internal capacity for R&D and
instead outsource R&D through cooperative relationships
with research universities. Rather than welcoming
them with open arms, many American universities
are negotiating with them just as other companies
would, insisting on beneficial intellectual property
rights and adequate support of research costs. Cooperative
arrangements with universities will have to
have sufficient benefits to compete with spinoffs, either
through direct financial support of the university by industry
or through indirect support through industry’s
ability to influence government policies for investing in
R&D and higher education. This brave, new world of
peer-to-peer university-industry relationships has been
a shock to many companies that have long viewed support
of higher education as philanthropy rather than a
quid pro quo strategic technology alliance!

49
Infrastructure
In the last half of the 20th century, state and federal
efforts to build the transportation networks necessary
for the shipment of goods and services were key to the
economic prosperity of our state. The interstate highway
system and the expansion of major airports were
key elements in connecting Michigan’s cities and industries
to other economic centers both in the United
States and the world. Detroit became a great economic
center, in part, because of its highway and rail linkages
to other centers (Chicago, Cleveland, Toronto) and its
air linkage to the world.
Today, digital technology has become the infrastructure
necessary for the commerce of a knowledge
economy. Our rapid evolution into a knowledge-based,
global society has been driven in part by the emergence
of powerful new information technologies such as digital
computers and communications networks. Modern
digital technologies have vastly increased our capacity
to know and do things and to communicate and collaborate
with others. They allow us to transmit information
quickly and widely, linking distant places and
diverse areas of endeavor in productive new ways. This
technology allows us to form and sustain communities
for work, play, and learning in ways unimaginable.
We live in a networked world, in which ubiquitous,
high-bandwidth connectivity has become essential not
only for economic prosperity but for full participation
in a knowledge society. The value of networks increases
as the square of the number of its participants (Kahn’s
law), leading to the formation of new knowledge communities
and innovative business, and unleashing
global competition. In fact the Gartner Group has estimated
that the economic benefit of a ubiquitous broadband
infrastructure for the State of Michigan would be
in the range of $300 to $500 billion over a 10-year period
(Gartner, 2001).
Yet here again Michigan has fallen behind, ranking
24th among the states in the growth rate of deployed
broadband lines and very last in ILEC per-line investments.
Gartner estimates that the current lag in access
penetration, if not addressed, represents a $440 billion
shortfall in gross state production over the next decade.
Gartner concludes, “It is certainly not the lack of interest
in the technology that is creating the gap between
Michigan and the U.S. as a whole. Price and ability to
pay may be a contributor. But lack of ubiquitous access
to a broadband network may be a root cause, particularly
in higher socioeconomic levels.”
What is lacking is a visionary public policy. In the
case of the interstate highway system or air transportation,
government recognized the public-good nature of
providing the necessary infrastructure for transportation
and therefore provided public support and regulation.
In contrast many states and the federal government
have largely left it to the private sector–primarily
the telcoms and cable industry–to provide the “cyberinfrastructure”
necessary for the knowledge economy.
Unfortunately, the financial incentives and regulatory
structure have not stimulated the necessary private investments,
and as a result Michigan has fallen far behind
other states and nations in building the infrastructure
necessary for its future prosperity.
While the recent efforts by both local communities
and the state to create wireless hubs are commendable
(e.g., “wireless Michigan” or “wireless Oakland County”),
thus far these are being proposed on the cheap,
without significant public financing. Furthermore, it is
clear that a term-limited legislature is particularly susceptible
to lobbying by the telcoms and cable companies
to block these efforts, even though it has been the
reluctance of these companies to invest adequately in
Michigan’s broadband infrastructure that is putting our
state at risk. (Here one need only compare the broadband
resources of San Antonio, SBC’s corporate headquarters,
with those of Detroit!)
This is an extremely serious issue. It has become
clear that without strong action by state government,
either through public investment in statewide network
connectivity at a level similar to the interstate highway
system, or through regulatory pressures exerted
through the Michigan Public Service Commission on
the telcoms and cable companies to force them to install
high-bandwidth for every Michigan citizen and every
Michigan business, we will simply not be able to close
the high-speed access gap for the citizens of the state.
Imagine how the Michigan automotive industry would
have evolved if our people had been forced to drive
along one-lane dirt roads. That is precisely the situation
we now face for the electronic commerce that is evolving
through the world.

50
Challenges at the Federal Level
The United States is part of a global economy,
and research and development (R&D) are performed
worldwide. Multinational corporations manage their
R&D activities to take advantage of the most capable,
most creative, and most cost-efficient engineering and
scientific talent, wherever they find it. Smaller U.S.
firms without global resources are facing stiff competition
from foreign companies with access to talented
scientists and engineers—many of them trained in the
United States—who are the equals of any in this country.
Relentless competition is driving a faster pace of innovation,
shorter product life cycles, lower prices, and
higher quality than ever before. To meet the demands
of global competition, other countries are investing
heavily in the foundations of modern innovation systems,
including research facilities and infrastructure
and strong technical workforces (NSB, 2003). Some of
the innovations that emerge from these investments
will be driven by local market demands, but many will
be developed for export markets. As these and other
countries develop markets for technology-laden goods
and international competition intensifies, it will become
increasingly difficult for the United States to maintain a
globally superior innovation system.
Even though current measures of technological
leadership—percentage of gross domestic product
invested in R&D, absolute numbers of researchers,
labor productivity, high-technology production and
exports—still favor the United States, a closer look at
the engineering research and education enterprise and
the age and makeup of the technical workforce reveals
several interrelated trends indicating that the United
States may have difficulty maintaining its global leadership
in technological innovation over the long term.
The large, growing imbalance in federal funding for
research between engineering and physical sciences on
the one hand and biomedical and life sciences on the
other, combined with a shift in funding by industry and
federal mission agencies from long-term basic research
to short-term applied research, raises concerns about
the level of support for long-term, fundamental engineering
research. The market conditions that once supported
industrial investment in basic research at AT&T,
IBM, RCA, General Electric, and other giants of corporate
America no longer hold. Because of competitive
pressures, U.S. industry has downsized its large, corporate
R&D laboratories in physical sciences and engineering
and reduced its already small share of funding
for long-term, fundamental research. Although industry
currently accounts for almost three-quarters of the
nation’s R&D expenditures, its focus is primarily on
short-term applied research and product development.
In some industries, such as consumer electronics, even
product development is increasingly being outsourced
to foreign contractors.
Consequently, federal investment in long-term research
in universities and national laboratories has become
increasingly important to sustaining the nation’s
technological strength. But just as industry has greatly
reduced its investment in long-term engineering research,
mission agencies that have traditionally been
engineering-intensive have also shifted their focus to
Threats Elements Opportunities
Stagnant federal fupport
of phy sci & eng R&D
Short-term nature of industrial R&D
Imbalance in federal R&D support
Budget weakness in states
Weak domestic student SMET interest
Weak minority/women presence
Post 9-11 impact on flow
of international SMET students
obsolete SMET curricula
Increasing laboratory expense
Rapid escalation of cyberinfrastructure
needs
Inadequate federal R&D
support in key areas
Weakened state support
New Knowledge
(Research)
Human Capital
(Education)
Infrastructure
(Facilities, IT)
Policies
(Tax, IP, R&D)
Innovation
National Priorities
Economic Competitiveness
National and Homeland Security
Public health and social well-being
Global Challenges
Global Sustainability
Geopolitical Conflict
Opportunities
Emerging Technologies
Interdisciplinary Activities
Complex, Large-scale Systems

51
The fraction of R&D provided by the federal government
has dropped to less than 30%, resulting in a major shift
away from basic research toward applied development.
short-term research. For example, U.S. Department of
Defense (DOD) funding for both basic and applied research
has fallen substantially from peak levels in the
1990s, and cuts of more than 20 percent in 6.1, 6.2, and
6.3 budget categories are projected for FY2006 (AAAS,
2005). Given the importance of DOD funding to engineering
research in key disciplines—DOD funds about
40 percent of engineering research at universities and
more than 50 percent of research in electrical and mechanical
engineering—these reductions have had a
significant impact on the level of fundamental research
conducted in a number of engineering fields (NRC,
2005).
The stagnating federal investment in research and
research infrastructure has weakened the human-capital
foundation of the American research enterprise. An
innovation-driven nation will require a large cadre of
scientists, engineers, and innovators with the depth of
knowledge and creativity to create breakthrough technologies
and systems. In addition to solid grounding
in fundamental engineering concepts, these knowledge
professionals must have the ability to address complex
systems in multidisciplinary research environments.
The country is at a crossroads. We can either continue
on our current course—living on incremental improvements
to past technical developments and gradually
conceding technological leadership to trading
partners abroad—or we can take control of our destiny
and conduct the necessary research, capture the intellectual
property, commercialize and manufacture the
products, and create the high-skill, high-value jobs that
define a prosperous nation. The United States has the
proven ability and resources to maintain the global lead
Federal R&D is increasingly dominated by defense and
biomedical research, corresponding to a significant
erosion in physical science and engineering research.
in innovation. Yet the question remains as to whether
its leaders have the vision and the resolve to make the
necessary investments in the nation’s future.
Public Policy
Michigan’s leaders have not been willing to acknowledge
that the rest of the world is changing. They
have, instead, held fast to an economic model that is not
much different from the one that grew up around the
very early automobile era–an era that passed long ago.
Michigan industry, labor, and government continue to
be addicted to an entitlement mentality that has long
since disappeared in other economic sectors that have
recognized the realities of a flat world.
Compounding this difficult situation is a state gov-
The Bush Administration is proposing even deeper
cuts in federal R&D over the next several years.

52
ernment constrained by term limits (for both legislators
and governor) that erode experience and perspective
and a political environment where party priorities are
increasingly dictated by ideology rather than strategy.
State policies also continue to be dominated by the obsolete
agendas of big government, big industry, big labor,
and, at times, big universities, who all too frequently
are willing to sacrifice the long-term welfare of the public
(e.g., through investments in education) in an effort
to obtain tax breaks or regulatory concessions.
State government is burdened with an unwillingness
to think outside the box. Public leaders still promote
old ideas and old philosophies from the past, a
different time, totally irrelevant to today. The baby
boomer priorities–health care, corrections, homeland
security, reduced tax burdens, to the neglect of education—will
cripple the state’s future.
Unable (or unwilling) to read the handwriting on
the wall, Michigan continues to grasp at straws such
as legalized gambling (our state now ranks among the
nation’s leaders in the number of casinos, horse tracks,
and other betting venues), tax abatements for dying yet
politically influential industries, infrastructure fluff like
casinos and professional sports stadiums, or tax cuts,
primarily targeted to the wealthy, rather than investing
in the key future of the state, its educational opportunities
and its people. As a recent newspaper editorial put
it, “State government treats Michigan’s 15 public universities
the way I treat my roof, putting off repairs to
fund other desires, and then paying heavily later when
the roof falls in.”
Economists single out higher education as the best
way to address the nation’s economic challenges. They
point to the fact that not only does a college degree
double the earnings capacity of a high school graduate,
but that the knowledge-intensive jobs that are key
to economic growth in the 21st century require such
advanced learning and skills. One need only look at
the relative economic health of various regions of the
nation (not to mention the world) to see a very direct
correlation between the percentage of college graduates
and the prosperity of a region.
Bill Gates stresses that cutting-edge companies base
their decisions to locate and expand in states more on
their talent pool and culture for innovation than on
tax policy. Asked what will be more important to economic
development, education or low taxes, Gates said
companies with breakthrough technologies will “be far
more sensitive to the quality of the talent instead of the
tax policy.” Hence states should look at their education
policies, both K-12 and higher education, as one of their
highest priorities. Where top universities are located is
where new companies dealing with the biosciences and
other high technology projects will locate, Gates stresses.
Having topflight universities also presents an advantage
in drawing intellectual talent to a region. Being
an “IQ magnet is a self-enforcing thing.” (Gates, 2005).
Yet for several decades, Michigan’s policies for public
higher education have been directed toward the lowest
common denominator of institutional quality, perhaps
most recently illustrated by the announced goal
to double the number of college graduates in Michigan,
but without any plan to provide the necessary additional
resources to a higher education system already
reeling from several years of deep budget cuts. Instead
of providing adequate appropriations to sustain quality
programs for Michigan citizens, state government has
chosen to gain political support by attacking universities
for the tuition increases that are inevitably a consequence
of state budget cuts and earlier tuition constraints.
Moreover, state leaders have chosen to focus
the limited additional funds provided by the tobacco
settlement on merit-based scholarship programs, which
predominately benefit upper-income families, rather
than providing the need-based financial aid that most
states (and scholars) have found to be the key to access.
Put more bluntly, Michigan state government has not
given high priority to funding higher education for almost
three decades, preferring instead to build prisons,
casinos, or sports stadiums or to subsidize the wealthy
through tax cuts, low public university tuitions, and
merit-driven financial aid programs.
We need to take a hard look at state spending policy
generally, to ask the important question: What is the
role of state government and how should resources
be allocated For decades Michigan was fabulously
wealthy. We developed a culture of expensive practices
and expectations: employee benefits, health care, social
services, and litigation. Yet today, we continue to deploy
our tax resources–already limited both by a weak
economy and tax relief commitments made in more
prosperous times–to pay for the past rather than in-

53
vesting in the future by creating new knowledge, new
skills, and new jobs.
Not investing in knowledge generation, research,
and education is absolute lunacy in a knowledge-intensive
society. Although many public leaders ignore
this reality of the age of knowledge, they do so at risk
not only to Michigan’s future, but increasingly to their
own political survival as public awareness of the importance
of investment in learning and knowledge resources
grows.
Michigan is far more at risk than many other states
because its manufacturing-dominated culture is addicted
to an entitlement mentality that has long since
disappeared in other regions and industrial sectors.
Moreover, politicians and the media are both irresponsible
and myopic as they continue to fan the flames of
the voter hostility to an adequate tax base that is capable
of meeting both today’s urgent social needs and
longer-term investment imperatives such as education
and innovation. As Bill Gates warned, cutting- edge
companies no longer make decisions to locate and expand
based on tax policies and incentives. Instead they
base these decisions on a state’s talent pool and culture
for innovation–priorities apparently no longer valued
by many of Michigan’s leaders, at least when it comes
to tax policy.
Public Attitudes: Half Right (Essentially) and Half
Wrong (Terribly!)
Despite the actions of state government, and the
platforms of the state’s political parties, public surveys
reveal a far more enlightened perspective on the part of
the electorate with respect to the importance of higher
education. In recent surveys Michigan voters say public
universities are critical to the state’s economy, providing
job training, economic development, and research
that will determine the state’s future prosperity. While
families value higher education for the educational
opportunities Michigan’s colleges and universities
provide to their sons and daughters, in today’s highly
competitive global economy, the public values our universities
even more because of their capacity to create
new jobs and stimulate the economy. Despite the rhetoric
of state government, higher tuition levels are not
really a major concern of the public, who understand
that as state support erodes, higher tuition levels are
inevitable if quality is to be sustained. And they accept
that quality and access are the highest priorities at this
point in the state’s history–not bargain-basement prices
for bargain-basement quality (PCSUM, 2004).
As the University Investment Council observed:
Michigan housed a public university 20 years before it
gained statehood, and 20 years after statehood it invented
the land grant commitment of public service, expanded
class offerings, and access to everyone. Generations of
families have built loyalty to one or more public universities.
Generations of taxpayers and private donors have
given generously to the campuses. Hardworking Michiganians
who never attended college nonetheless root for
their teams, stroll their campuses and museums, and hope
that one day their child will enter and graduate from the
university. It is very much part of the American Dream.
Michigan’s public universities have powered our economy
and lifted us up culturally. We are a stronger, more
civil society for them. They have added immeasurably to
our social progress. Today’s university and political leaders
can strengthen higher education. We all will benefit
greatly from that. So too, will generations to come.
The public realizes this. Recent polling suggests that
the Michigan public may be far ahead of our political
leaders in sensing that the primary role of higher education
in our state has become job creation rather than
simply providing a place to send the kids (PCSUM,
2004). They understand, like most economists, that the
real cure to globalization, outsourcing, off-shoring, and
technological change is the availability of advanced
educational opportunities.
That’s the good news. Now for the bad news. A Detroit
News poll in spring of 2005 found that just 27% of
parents consider a good education essential for a successful
life, and nearly half don’t agree that everybody
should go to college. As pollster Ed Sarpolus summarized
the results, “This is still a state that believes in the
university of hard knocks. We still believe that sweat,
not brains, will get us ahead.” Furthermore, only 3%
of parents see engineering or computers as a likely career
path for their children. As Nolan Finley, a Detroit
news editor, summarized the implications of these depressing
statistics, “Michigan is doomed to be the new

54
Mississippi. A backward state locked to a last-century
industry, awash in ignorance and unprepared to seize
the opportunities presented by new technologies and
scientific advances” (Finley, 2005).
The Absence of a National Agenda
The future of public higher education is of immense
importance to the United States. Beyond the fact that
three-quarters of all college students are enrolled in
public universities, the increasing dependence of our
nation on advanced education, research, and innovation
compel efforts to both sustain and enhance the quality
of our public colleges and universities. Yet, the current
structure for financing public higher education may
no longer be viable. Traditionally, this has involved
a partnership among states, the federal government,
and private citizens (the marketplace). In the past the
states have shouldered the lion’s share of the costs of
public higher education through subsidies, which keep
tuition low for students; the federal government has
taken on the role of providing need-based aid and loan
subsidies. Students and parents (and to a much lesser
extent donors) pick up the rest of the tab.
This system has become vulnerable as the states face
the increasing Medicaid obligations of a growing and
aging uninsured population, made even more difficult
by the state tax-cutting frenzy during the boom period
of the late 1990s. This is likely to worsen as a larger
percentage of young people and working adults seek
higher education while the tax-paying population ages
and health care costs continue to escalate. As Kane
and Orzag conclude, “the traditional model of higher
education finance in the U.S. with large state subsidies
to public higher education and modest means-tested
grants and loans from the federal government is
becoming increasingly untenable.” (Kane, 2003).
Little wonder then that many are calling upon
national leaders to articulate a national agenda for
higher education in America, similar to other national
agendas in K-12 education such as “A Nation At Risk”
and “No Child Left Behind”. Of course, we have had
such national higher education agendas before during
times of major national challenge and opportunity.
The Land-Grant Acts of the 19th century addressed
the needs of an emerging industrial nation and the
importance of education to the working class. The
government-university research partnership, proposed
by Vannevar Bush in 1944 and implemented following
WWII, along with the G.I. Bill and the recommendations
of the Truman Commission, established the principle
of federal support of research and graduate education
on the campuses while launching the massification of
higher education in America. The National Defense
Education Act of the late 1950s and 1960s established
investments in higher education as critical to national
security during the height of the Cold War.
Yet since that time, for almost four decades, the
nation really has had no agenda for higher education
in America. Little wonder that at times we appear to
be drifting aimlessly, with changing social priorities
putting at great risk that the very institutions that
earlier generations built and supported so strongly
as key to the future of a great nation. Here part of
the challenge is a profound misunderstanding of the
relationship among the cost, price, and value of a
college education by both students and parents and by
elected public officials. The funding of higher education
by state and federal government support (including
tax benefits), philanthropy, and other various revenue
streams not only disguise true costs but make pricing,
e.g., tuition, largely fictitious, since all students, rich
and poor, in public and private institutions receive very
substantial subsidies. In some ways the financing of
higher education is reminiscent of health care, where
third-party payers (insurance companies, Medicare
and Medicaid) also decouple the consumer from the
marketplace. However in health care, at least one can
estimate the costs of medical treatment and patients can
assess the value of their health care, in contrast to higher
education where true costs are difficult to estimate and
the benefit of a college education is usually assessed
only many years later.
One might approach this as an appropriate challenge
to the federal government. After all, in some ways it
was federal inaction that created the current dilemma,
crippling state budgets with unfunded federal mandates
such as Medicaid, through federal inaction on national
priorities such as universal health care, and shifting
philosophies of federal financial aid programs. It is
also the federal government’s responsibility to invest
adequately in providing for economic prosperity and

national security, particularly in the new flat world
characterized by phenomena such as outsourcing and
off-shoring characterizing a hypercompetitive, global,
knowledge-driven economy increasingly dependent
upon knowledge workers, research, and technological
innovation. (Friedman, 2005).
55

56
Chapter 6
The Michigan Roadmap
We now turn to the final phase of the roadmapping
process: the Michigan Roadmap itself. This is
designed as an evolving plan to suggest the path our
state might take to transform itself from the deteriorating
industrial economy of Michigan today to a vibrant,
knowledge economy of Michigan tomorrow, capable
of competing in a global economy and providing our
citizens with prosperity, social well-being, and security.
As we have stressed throughout this report, in a knowledge-intensive
society, regional advantage is achieved
through creating a highly educated and skilled workforce
that is competitive on a global level. It requires
an environment that stimulates creativity, innovation,
and entrepreneurial behavior. It also requires supporting
infrastructure–world-class schools and universities,
research laboratories and cyberinfrastructure, tax and
intellectual property policies. And it requires vision,
commitment, and leadership in both the public and
private sectors.
There is ample experience from elsewhere, from
California to North Carolina to Ireland to India–not to
mention Michigan’s own history–to demonstrate that
visionary public policies and significant public investment
are necessary to produce the necessary human
capital, new knowledge, and infrastructure to support
a knowledge economy. Hence the recommendations in
the Michigan Roadmap are framed toward these goals,
divided into recommendations for the near term that
would be reasonable objectives for the remainder of
this decade, followed by a series of more ambitious recommendations
aimed at transforming Michigan into a
true knowledge society.
Among the essential elements for a knowledge
economy–human capital, new knowledge, and infrastructure–it
is our belief that investments in Michigan’s
capacity to generate new knowledge through research,
innovation, and entrepreneurial activities will have the
highest payoff in the short term. Hence in the nearterm
recommendations we have stressed major public
investments in the state’s research universities, the production
of scientists and engineers, technology transfer,
corporate R&D, and high-tech business startups, aimed
at creating the new industries that will eventually replace
Michigan’s declining factory-based manufacturing
industries. However even in the near term, bold
steps to begin to build the necessary knowledge-based
workforce are both imperative and appropriate, although
it will take time to achieve the necessary progress.
Investing in building the necessary infrastructure
will also be essential to support and sustain both innovation
and workforce development. The challenge will
be to provide ample opportunities for postsecondary
education to all Michigan citizens while achieving and
sustaining the world-class universities capable of providing
graduate education, research, and innovation at
the very highest level of excellence.
For the longer term, there can be no more compelling
priority with a higher rate of return than investment in
our people through public support of educational opportunities
at all levels. Michigan must build and sustain
a world-class education system, spanning the full
range of educational opportunities, from pre-school to
K-12 to higher education, to graduate and professional
education, to lifelong learning. To be sure, this will be
challenging, since it demands substantial new investments
in education–both in individuals (e.g., financial
aid, vouchers) and institutions (appropriations)–that
will almost certainly require new taxes and a significant
restructuring of Michigan’s tax policies and tax base. It
will also demand new standards for excellence and accountability
for institutions, students, and families. But
our citizens deserve these lifelong educational opportunities–and
today’s hypercompetitive global economy
demands it!

57
The Present
Michigan’s Roadmap to
The Near Term
A Knowledge Society
The Long Term
A Roadmap from Michigan Today to Michigan Tomorrow.
The Roadmap: The Near Term (...now!...)
In the near term our principal recommendations focus
on developing policies and making the necessary
investments in education, innovation, and infrastructure
in a manner that takes advantage of strong market
forces and leverages both federal and private investment.
Our recommendations are also aimed at providing
public institutions–including state government
itself–with capacity, incentives, and encouragement to
become more agile and market-smart.
Human Capital
1. Michigan simply must increase the participation of its
citizens in higher education at all levels–community college,
baccalaureate, and graduate and professional degrees. This
will require a substantial increase in the funding of higher
education from both public and private sources as well as significant
changes in public policy. It will also likely require
a dedicated source of tax revenues to achieve and secure the
necessary levels of investment during a period of gridlock in
state government, perhaps through a citizen-initiated referendum.
This, in turn, will require a major effort to build
adequate public awareness of the importance of higher education
to the future of the state and its citizens.
As we have stressed throughout this report, the most
urgent near-term challenge facing our state’s higher education
system is the need to develop more enlightened
policies and strategies that enable us to invest sufficient
public funds in higher education while providing our
academic institutions with the incentives and agility to
respond to market pressures. In order to ensure sufficient
investment, we need to follow the guiding principles
of quality, access, diversity, and market agility. It
is only through an investment in knowledge resources
and innovation–education, research, and the infrastructure
to support them–that Michigan citizens will be able
to compete in this global economy. Simplistic solutions
that merely try to increase degree production without
addressing quality or funding requirements are clearly
both incomplete and inadequate.
However, we also acknowledge that Michigan’s
current tax base is inadequate for this purpose. Tax
cuts implemented during the boom-days of the 1990s
have created a dysfunctional state budget, no longer
adequate to address current obligations such as K-12
education, corrections and unfunded federal mandates
such as Medicaid, while investing adequately in Michigan’s
future, particularly during periods of a weak
economy–which, without new investments, are likely
to become both more frequent and more severe for our

58
state. Yet the current inability of state government to
develop and implement a tax policy appropriate for a
21 st century knowledge economy in the face of public
resistance from an aging baby boomer population gives
us pause.
While flexibility in state budget and tax policy is
always desirable, particularly during periods of major
social change, we are convinced that investments in
education, innovation, and infrastructure are simply
too critical to be subject to the year-to-year pressures
of a dysfunctional state budget process and an electorate
still embracing an entitlement mentality from
Michigan’s industrial past. Hence we recommend serious
consideration be given to funding public higher
education, and perhaps knowledge generating activities
such as research, innovation, and supporting infrastructure,
from a dedicated tax revenue stream secure
from tampering by state government. This will likely
require a citizen-driven initiative (as it has in several
other states), and to this end we strongly support the
efforts of the recently formed K-16 Coalition for Michigan’s
Future to achieve just such a mechanism (K-16
Coalition, 2005).
2. To achieve and sustain the quality of and access to educational
opportunities, Michigan needs to move into the top
quartile of states in its higher education appropriations (on
a per student basis) to its public universities. To achieve this
objective, state government should set a target of increasing
by 30% (beyond inflation) its appropriations to its public
universities over the next five years.
There is ample evidence that Michigan’s current
investments in public higher education are simply inadequate,
whether compared with other states, other
nations, or in light of the current and future challenges
faced by the state. Today, Michigan’s annual appropriations
to higher education, at a level of $5,600 per FYES,
have not only fallen below the national average, but
declined to become lowest in the Great Lakes region.
Michigan simply cannot compete without a highly
skilled workforce, and that workforce is dependent on
the availability of advanced educational opportunities.
It is important to set appropriate benchmarks for
critical investments such as public higher education. If
Michigan aspires to return to a position of national economic
leadership, it follows that it must be prepared to
invest adequately to create a workforce and stimulate
the innovation required for such economic prosperity
in a global knowledge economy. In higher education,
just as in other economic sectors, quality and access require
investment. Insisting on bargain-basement prices,
as tax-paying citizens or tuition-paying parents, will inevitably
lead to bargain-basement quality, which would
likely doom our state’s capacity to transform itself into
a 21st-century knowledge economy.
More specifically, simply moving to the average of
other Great Lakes states would require additional support
of Michigan’s public universities by a 10% increase
in state appropriations per student (after inflation). To
move into the top quartile of the states would require
a 30% increase, while moving to the level of support
provided in states with strong knowledge-based economies
such as California, North Carolina, Texas, and
Massachusetts, would require an increase of 40%. We
recommend an intermediate objective of moving to the
top quartile of the states by increasing state appropriations
per student by 30% (beyond inflation) over the
next five years, with possible further increases after that
to allow Michigan to compete with the leading hightech
states.
3. The increasing dependence of the knowledge economy
on science and technology, coupled with Michigan’s relatively
low ranking in percentage of graduates with science and
engineering degrees, motivates a strong recommendation to
state government to place a much higher priority on providing
targeted funding for program and facilities support in
these areas in state universities, similar to that provided in
California, Texas, and many other states. In addition, more
effort should be directed toward K-12 to encourage and adequately
prepare students for science and engineering studies,
including incentives such as forgivable college loan programs
in these areas (with forgiveness contingent upon completion
of degrees and working for Michigan employers). In addition,
state government should strongly encourage public universities
to recruit science and engineering students from other
states and nations, particularly at the graduate level, perhaps
even providing incentives if they accept employment following
graduation with Michigan companies.
Industries and firms, even those that are based in

59
a more traditional economy, are organizing their work
around technology. To be successful, all companies are
forced to focus on using advanced information technology.
Where will the human capital for such advanced
technology deployment come from In the old economy,
workers often followed companies, so public policies
such as tax abatements to attract large firms made
sense. However, as knowledge workers become more
important factors in production, companies are often
locating where knowledge workers already are. The
implications to Michigan are extremely serious with its
relative weakness in the production of scientists, engineers,
and technologies. Advocates from nearly every
industrial sector are calling on government to respond
to the growing competitiveness challenge by increasing
public investments in science and engineering education
and basic research and development.
Michigan ranks relatively low among the states in
the penetration of science and engineering degrees
among its college-educated workforce. Moreover, because
of their intensive capital needs for laboratory
facilities and equipment, science and engineering programs
tend to suffer comparatively more damage than
less technology-dependent programs during periods of
inadequate state appropriations such as the past several
years. This is aggravated by Michigan’s inability to
provide tax dollars for badly needed campus academic
facilities for over a decade.
Although Michigan is more at risk in this area than
many other states, this is a national problem as well.
As Friedman has stressed, the generation of scientists
and engineers motivated to go into science by Sputnik
and the Apollo program is now approaching retirement.
Yet the fraction of American 18-24 year olds who
receive S&E degrees has fallen to 17 th in the world. In
the United States eroding student interest in science
and mathematics and the weakness of K-12 education
have led to a situation in which engineering students
comprise less than 5% of U.S. college graduates, compared
to 12% in Europe and over 50% in some Asian
countries. The United States has traditionally been able
to compensate for this domestic shortfall by using its
high quality universities to attract talented students in
science and engineering from other countries. However
in the wake of 9-11, a tightening of immigration policies
coupled with the increasing efforts of other nations to
compete for foreign university students has threatened
this supply. As Intel CEO Craig Barrett warns: “We are
not graduating the volume of scientists and engineers,
we do not have a lock on the infrastructure, we do not
have a lock on the new ideas, and we are either flat lining,
or in real dollars cutting back out investments in
physical science.”
Michigan should heed Friedman’s warning: “It takes
15 years to create a scientist or engineer. We should be
embarking on an all-hands-on-deck, no-budget-toolarge
crash program for S&E education immediately.
The fact that we are not doing so is our quiet crisis. Scientists
and engineers don’t grow on trees. They have to
be educated through a long process because this really
IS rocket science.” (Friedman, 2005)
4. Colleges and universities should place far greater emphasis
on building alliances that will allow them to focus
on unique core competencies while joining with other institutions
in both the public and private sector to address the
broad and diverse needs of society in the face of today’s social,
economic, and technological challenges while addressing
the broad and diverse needs of society. For example, research
universities should work closely with regional univerisities
and independent colleges to provide access to cutting-edge
knowledge resources and programs.
One of the ironies of the increasingly competitive
global marketplace is the need to cooperate through alliances.
This is an important approach that should also
be adopted by higher education. Here the key is to encourage
far more mission differentiation among institutions,
where colleges and universities develop strong
capacity in unique areas and then form alliances with
other institutions, cooperating and sharing resources,
to meet the broader needs of the state. For example,
the state’s flagship research universities (UMAA, MSU)
will be under great pressure to expand enrollments to
address the expanding populations of both college-age
and adult students, possibly at the expense of their research
and service missions. It might be far more constructive
for these institutions to form close alliances
with regional universities and community colleges to
meet these growing demands for educational opportunity
while protecting their unique capacity to conduct
the cutting-edge research critical to an economy

60
increasingly dependent on technological innovation.
Another example would be alliances between research
universities and independent colleges that take mutual
advantage of the learning-intensive environment of the
latter and the vast intellectual resources of the former.
The experience of successful higher-education associations
suggests that the key coordination point
for such interactions should be the chief academic officers,
the provosts, since they are, in effect, the chief
operating officers for their institutions and somewhat
less pressured into a competitive mode. Such an organization
already exists through the Presidents Council
of State Universities of Michigan, but similar organizations
should be developed for Michigan’s independent
colleges. Furthermore, there should be separate organizations
for the state’s research universities (UMAA,
MSU, WSU, and MTU), comprehensive public universities
(WMU, EMU, CMU, NMU, OU, GVSU, SVSU,
FSU, LSSU, UMD, and UMF), community colleges, and
independent colleges. However there should also be
alliances among institutions with differing roles and
missions (e.g., partnering research universities with liberal
arts colleges and community colleges) as well as
between higher education and the private sector (e.g.,
information technology and entertainment companies).
Differentiation among institutions should be encouraged,
while relying upon market forces rather than
regulations to discourage duplication.
New Knowledge (R&D, innovation)
5. The quality and capacity of Michigan’s learning and
knowledge infrastructure will be determined by the leadership
of its public research universities in discovering new knowledge,
developing innovative applications of those discoveries
that can be transferred to society, and educating those capable
of working at the frontiers of knowledge and the professions.
State government should strongly support the role of these
institutions as sources of advanced studies and research by
dramatically increasing public support of research infrastructure,
analogous to the highly successful Research Excellence
Fund of the 1980s. Also key will be enhanced support of the
efforts of regional colleges and universities to integrate this
new knowledge into academic programs capable of providing
lifelong learning opportunities of world-class quality while
supporting their surrounding communities in the transition
to knowledge economies.
While adequate investment in quality educational
opportunities is essential, this by itself will not create the
new knowledge-intensive jobs demanded by the global
economy. As Bill Gates has noted, cutting edge companies
no longer make decisions to locate and expand in
states based on tax policies and incentives. Instead they
base their decisions on a state’s talent pool and culture
for innovation, with particular focus on world-class research
university. Gates notes that California provides
a perfect example of a state that saw huge growth in
the high tech industries despite a relatively unfavorable
tax climate, and it continues to benefit today by sustained
public investment in the University of California
system and the launch of a series of major state-funded
R&D centers in key technologies (biotechnology, communications
technology) on university campuses.
Although today Michigan tends to focus its efforts
more on public relations (Michigan First) and gimmicks
(lotteries) while cutting support for research universities,
during the 1980s the administration of Governor
James Blanchard supported a highly successful effort to
invest in the research capacity of its universities through
the Research Excellence Fund. As a case study, approximately
$10 million a year for a seven-year period was
focused on three major research centers in the University
of Michigan’s College of Engineering: The Center
for Research on Integrated Manufacturing, The Center
for Advanced Electronics and Optics Technology, and
The Center for Machine Intelligence. The impact of this
investment was quite extraordinary: the production of
cutting edge research, products, and methodologies in
manufacturing, information technology, microelectronics,
optics, MEMS, and biotechnology; the spinoff of
16 successful companies; numerous technologies that
were adopted by Michigan industry; the involvement
in research of hundreds of Michigan companies that
became partners in the centers; and a ramping up of
federal research funding attracted by the UM College of
Engineering by a factor of seven-fold, from $18 million
a year to over $140 million a year, leveraging the state
investment by over a factor of 10.
Unfortunately, after seven years of funding, politics
and a new governor and state legislature eliminated the
Research Excellence Fund. Yet today this state program

61
A demonstration of the remarkable impact of the
Research Excellence Fund of the 1980s, stimulating
a ten-fold growth in federal research, spinning off
numerous startup companies, and providing
key technologies to Michigan idustry.
provides quite strong evidence of precisely the type of
investment of state tax dollars necessary to “support
high quality research and applied technology development
at Michigan public colleges and universities
as a means for making existing Michigan businesses
more competitive and creating new jobs and businesses
based on newly developed products and successes,”
in the words of the original Research Excellence Fund
legislation. Many other states have learned from and
since imitated this program. Unfortunately Michigan
did not…
6. In response to such reinvestment in the research capacity
of Michigan’s universities, they, in turn, must become
more strategically engaged in both regional and statewide
economic development activities. Intellectual property policies
should be simplified; faculty and staff should be encouraged
to participate in the startup and spinoff of high-tech
business; and universities should be willing to invest some
of their own assets (e.g., endowment funds) in state- and region-based
venture capital activities. Furthermore, universities
and state government should work more closely together
to go after major high tech opportunities in both the private
sector (attracting new knowledge-based companies) and federal
initiatives.
As we noted earlier, there are numerous examples
in which universities have not only encouraged faculty,
student, and staff participation in high tech startups,
but also provided or attracted substantial investment
capital for such activities (e.g., CONNECT in San Diego).
This creates a virtuous cycle of economic growth
and reinvestment in the subsequent waves of high tech
development.
Furthermore, close cooperation between state government
and research universities has also led to major
success in attracting both high tech industry and major
federal investments (e.g., the Research Triangle and
Centennial Campus in North Carolina, MCC and STC
in Austin, and Silicon Valley in California). Ironically,
in the 1980s, Michigan formed just such a partnership,
but then undermined its efforts through cuts in higher
education, chasing away major opportunities that later
located in Texas and California. Both state government
and Michigan research universities need to recommit
themselves to such partnerships for the long term, seizing
on current opportunities such as alternative energy
sources for the transportation industry (e.g., hydrogen
and hybrid technologies), nanoscale biotechnology,
and informations systems (Internet2 and the National
LambaRail).
7. Michigan must also invest additional public and private
resources in private-sector initiatives designed to stimulate
R&D, innovation, and entrepreneurial activities. Key
elements would include reforming state tax policy to encourage
new, high-tech business development, securing sufficient
venture capital, state participation in cost-sharing for federal
research projects, and a far more aggressive and effective effort
by the Michigan Congressional delegation to attract major
federal research funding to the state.
While the development of human capital is the primary
responsibility of the state’s educational institutions,
the generation of new knowledge–R&D, innovation,
entrepreneurial activities–and infrastructure will
require a partnership among business, higher education,
and state government. Just as state government
must begin to reinvest in the capacity of its public universities
to produce knowledge workers and research,
it must also provide strong incentives to reestablish
longer-term R&D as a priority for Michigan companies.
The state should support private sector investment in
joint university-industry collaborative research (e.g.,
through tax credits) and assist in meeting the cost-

62
sharing requirements for federally sponsored research
grants and contracts.
Here the Michigan Congressional delegation should
be encouraged to support legislation to provide strong
federal tax incentives and policy support to stimulate
increased industry investment in R&D. It should also
be directed to play a far more active role in attracting
federal research dollars to Michigan universities and
industry as one of its most important responsibilities.
Michigan Congressional representatives should also
seek committee leadership positions and influence necessary
to direct the establishment of major federal research
centers (FFRDCs) in Michigan.
State government must also play a stronger role in
stimulating high tech development. As we have noted,
while Michigan has the capacity to attract the technologists
and management necessary for startups, it is sadly
lacking in adequate private capital, particularly venture
capital, necessary for these activities. Here, state incentives
should be provided for the investment of both private
capital and public assets (e.g., state pension fund,
university endowment funds). The state can also play
a leadership role in encouraging the partnerships between
large, established companies and new startups
as well as coordinating university technology development
programs and technology transfer activities.
To its credit, Michigan has chosen to deploy a component
of its tobacco settlement funds into high-tech
areas (the Life Sciences Corridor). Most recently it has
proposed securitizing the tobacco revenue by selling
$1 billion of bonds to fund economic development (the
“Get Michigan Working” plan). Unfortunately, however,
such large sums are frequently diverted by lobbyists
to activities with little impact on long-term economic
development. The lesson learned from other states is
to invest through partnerships with higher education
and industry in high-tech research, innovation, and
startups that build upon areas of established strength
(e.g., alternative energy sources, advanced transportation
systems, biotechnology, information systems and
services) rather than play catchup in areas where Michigan
currently has no core competency.
Finally, there is a critical need to revise state tax
policy to be more supportive of small business startup
activities. As in so many other areas such as education,
the state continues to be seriously constrained by an obsolete
tax system, designed to favor a 20 th -century factory-based
manufacturing economy rather than a 21 st -
century knowledge economy. The state’s tax code must
be modernized so that it does not penalize and stifle the
growth of the companies of the future to subsidize the
industry of the past.
Infrastructure
8. Providing the educational opportunities and new
knowledge necessary to compete in a global, knowledge-driven
economy requires an advanced infrastructure: educational
and research institutions, physical infrastructure such as
laboratories and cyberinfrastructure such as broadband networks,
and supportive policies in areas such as tax and intellectual
property. Michigan must invest heavily to transform
the infrastructure for a 20 th -century manufacturing economy
into that required for a 21 st -century knowledge economy. Of
particular importance is a commitment by state government
to provide adequate annual appropriations for university capital
facilities comparable to those of other leading states. It is
also important for both state and local government to play a
more active role in stimulating the development of pervasive
high speed broadband networks, since experience suggests
that reliance upon private sector telcom and cable monopolies
could well trap Michigan in a cyberinfrastructure backwater
relative to other regions (and nations).
We have noted earlier the toll taken on higher education
in Michigan by the serious erosion in state support
of its public colleges and universities. Of particular
note here is the absence of any strategic plan for
maintaining the capital facilities infrastructure of state
universities, e.g., laboratories, libraries, and classroom
facilities. Michigan is unique among the states in providing
no sustained capital outlay for almost a decade,
in contrast to most other states that provide hundreds
of millions of dollars for this purpose each year. When
one considers that a rule of thumb for the renewal or
replacement of university capital facilities is based on
a 30 or 40 year amortization, the benign neglect of public
university capital needs by state government puts at
great risk the capacity of these institutions to meet the
growing needs of the state for advanced education and
research.
However of equal concern here is the inadequacy of

63
the new types of infrastructure required for prosperity
in an era increasingly dominated by the rapid evolution
of computer and communications technology. As Friedman
has noted, the emergence of the Internet, coupled
with the massive overinvestment of billions of dollars
in fiber networks during the dot-com bubble, has
driven down the cost of transmitting voice, data, and
images to practically zero, bringing people-to-people
and business-to-business connectivity to a whole new
level. Today almost one billion people are connected
through broadband, driving the emergence of the global,
knowledge-driven economy. But he goes on to note
that “while a huge amount of fiber was laid to connect
India and American, virtually none was laid to connect
American households due to a failure of the 1996 telcom
deregulation to permit real competition between
the telcoms and the cable companies.” (Friedman,
2005). Today the United States is the only industrialized
nation without an explicit national policy for promoting
broadband, and as a consequence, our nation has
dropped from 4 th to 13 th place in the global ranking of
broadband Internet use.
In the 20th century, public investments in transportation
infrastructure such as the Interstate Highway System
and international airports were the key to building
and sustaining Michigan’s manufacturing economy. In
the 21st century, cyberinfrastructure–computer resources,
broadband networks, and digital libraries–have
become the key infrastructure necessary to build and
sustain a knowledge-based economy. Other states and
nations are investing heavily in the infrastructure (e.g.,
Ohio’s OhioLINK) necessary to support a competitive
learning and knowledge environment. Greater bandwidth
is crucial because it allows faster transmission of
knowledge–important for business and for individuals
who can then engage in distance education, telecommuting,
and e-commerce. Michigan should achieve a
better balance between its investments of public funds
in institutions (colleges and universities) and in infrastructure
(the connective tissue linking institutions and
citizens).
Today it has become clear that public action is needed
to compensate for the inadequate effort of the private
sector (telecoms and cable companies) to provide
the necessary connectivity for Michigan citizens and
businesses. To wait on the private sector to respond
while other states and nations rush ahead with publicly
funded network infrastructures puts at risk perhaps a
million state jobs, as well as the necessary educational
infrastructure.
Proposals have been made in the past encouraging
state investment in building major broadband networks
such as LinkMichigan (Gartner, 2002). The Michigan
Economic Development Corporation has recognized
the need for a statewide network that could provide
links to non-profit organizations, government entities,
private industry and residents of the state. MEDC
urged that, “Access to high-speed telecommunication
services is the most important state infrastructure issue
for the new century. Whether for business, government,
healthcare, or educational purposes, higher-speed access
is increasingly becoming a necessity—not a luxury”
(MEDC, 2001).
Policies
9. As powerful market forces increasingly dominate public
policy, Michigan’s higher-education strategy should become
market-smart, investing more public resources directly
in the marketplace through programs such as vouchers, needbased
financial aid, and competitive research grants, while
enabling public colleges and universities to compete in this
market through encouraging greater flexibility and differentiation
in pricing, programs, and quality aspirations.
As we enter a new century, there is an increasing
sense that the marketplace is not only a more accurate
measure of public priorities than the ballot box or public
policy but also a more effective mechanism for allocating
both public and private investments. For example,
as the economic benefits of advanced education
in a knowledge society soar, and higher education is
increasingly viewed by society (and its elected governments)
as a private benefit rather than a public good, it
is important to allow market forces rather than public
policy to drive the learning enterprise. Hence at both
the state and federal level, government is shifting public
investment away from base support of institutions
and instead into the marketplace through voucher systems,
student financial aid programs, and competitive
research grants.
Yet this must be done in a sophisticated manner, else

64
the most fundamental responsibilities of government
will be abandoned. For example, economists have long
known that the most effective way to achieve access
to public higher education is through state or federal
need-based financial aid programs since this targets
limited tax dollars to those who most need assistance
to attend college. Merit-based scholarship programs
and low tuition at public universities, while politically
popular, primarily use tax dollars to benefit higher-income
students who usually need little incentive or financial
assistance in attending college. The same is true
for those programs providing tax incentives for college
expenditures, since these primarily benefit those with
sufficient incomes to incur substantial tax liabilities.
Since few state residents will pay sufficient state income
taxes to cover the costs of educating their children in
public universities (based upon the portion of state tax
revenue going to support higher education), it becomes
clear that merit-based scholarships, low tuition, and tax
incentives represent an extremely regressive social policy–in
a blunt sense, welfare for the rich at the expense
of educational opportunity for the poor.
10. Michigan should target its tax dollars more strategically
to leverage both federal and private-sector investment
in education and R&D. For example, a shift toward higher
tuition/need-based financial aid policies in public universities
not only leverages greater federal financial aid but also
avoids unnecessary subsidy of high-income students. Furthermore
greater state investment in university research capacity
would leverage greater federal and industrial support
of campus-based R&D.
Although public universities are state institutions,
they are supported largely by resources other than state
appropriations: private payments (e.g., tuition), federal
support (e.g., student financial aid, research grants),
gifts, and market-driven auxiliary activities (e.g., licensing
income, executive education, intercollegiate
athletics). Indeed, nationwide, almost two-thirds of the
support for American higher education comes from
private sources with another one-sixth from the federal
government. Hence it is imperative that Michigan strategically
target its tax dollars to leverage both federal
and private sector investment in advanced education
and research, compatible of course with fundamental
objectives such as broad access to and quality of educational
opportunities.
Earlier we discussed an excellent example of
such leveraging: the Research Excellence Fund of the
Blanchard administration. Through a relatively modest
investment ($10 million per year) in the UM College
of Engineering, the state reaped the benefit of over
$140 million per year in federal and industrial research
investments–not to mention the spinoff of numerous
startup companies, technology transfer, and the production
of high-quality engineering graduates.
Similarly, efforts to constrain tuition levels at the
state’s public universities have the perverse effect of not
capturing the full benefit of federal financial aid programs,
which have actually been designed to support,
in part, the far higher tuition levels at private universities.
Furthermore, low tuition levels provide unnecessary
subsidies for those affluent families who clearly
have the capacity to afford the costs of a college education,
as evidenced by the fact that they frequently send
their children instead to private colleges and universities
with costs several times that of public universities.
It is also important here to remind readers that efforts
to constrain tuition during a period of eroding
state support, while politically popular, can seriously
damage institutional quality. When state government
cuts appropriations per student at Michigan public universities
by 25% to 40%, as it has over the past five years,
institutions that have already optimized cost structures
over the past two decades to accommodate earlier erosion
in state support have only two options: increase
tuition or reduce quality. Reducing activity (e.g., enrollments
or research) is not an option for most, both because
of their increasing dependence upon tuition and
research grants and their sense of public purpose.
11. Key to achieving the agility necessary to respond to
market forces will be a new social contract negotiated between
the state government and Michigan’s public colleges
and universities, which provides enhanced market agility in
return for greater (and more visible) public accountability
with respect to quantifiable deliverables such as graduation
rates, student socioeconomic backgrounds, and intellectual
property generated through research and transferred into the
marketplace.

65
It is increasingly likely that market forces will dominate
public policy and public investment in determining
the future of most public universities, particularly
as state support continues to become a smaller and
smaller component of their revenue base. To micromanage
or constrain the options of public universities
during what might be a several-decade period of weak
public support could not only seriously damage their
quality but also hinder their capacity to serve the public
during this era of a market-driven higher-education
enterprise. Hence state and university should seek an
appropriate balance between accountability to public
purposes and the autonomy necessary to enable the
flexibility to adapt to market forces. For example, there
should be agreed-upon and measurable objectives to
ensure public accountability, e.g., student enrollments,
degree success rate, socioeconomic distribution of students,
technology-transfer activities, and sponsored research
funding in return for state government respecting
the constitutional autonomy of the institutions and
the authority of their governing boards.
While Michigan’s public universities are legally
owned by the people of the state, they are enduring
social institutions with a duty of stewardship to generations
past and a moral obligation to take whatever
actions are necessary to build and protect its capacity
to serve future generations. Unlike governments and
companies that exist from election to election or quarter
to quarter, universities span generations, connecting
the past with the future. Even though their actions
might conflict from time to time with public opinion
or the prevailing political winds of state government,
Michigan’s constitution clearly provides its public
universities with the capacity to set their own course
to serve this public purpose. When it comes to objectives
such as program quality or access to educational
opportunity, university governing boards have always
viewed these as long-term institutional decisions rather
than succumbing to public or political pressures of the
moment.
Yet it is also safe to say that the deep cuts in state appropriations
for Michigan public universities, at a time
when enrollments are growing along with Michigan’s
need for advanced education, research, and innovation,
have raised serious questions about whether state
government is a reliable partner in the role of public
higher education’s role in building a knowledge economy.
Governing boards, faculty, alumni, students and
parents, and the media are all beginning to question
whether term-limited elected state officials, responsive
to the increasingly narrow agendas of Michigan’s political
parties, can be trusted to act wisely or responsibly
in the state’s long-term best interests.
Similar concerns in other states have stimulated
a reconsideration of the social contract between public
higher education and state government, seeking to
provide public universities with the agility they need
not simply to respond to growing market forces, but to
finance themselves increasingly from the marketplace
as state support continues to decline as a proportion of
their operating budgets. In return, state universities are
willing to be held increasingly accountable for achieving
measurable outcomes such as graduation rates, the
socio-economic character of their students, technology
transfer, and other state priorities.
Across the nation numerous experiments are underway
redefine the nature of public higher education.
Some states such as Virginia and Colorado have created
new types of public universities that function more
as public corporations or authorities rather than state
agencies, allowing universities greater flexibility to
draw support from the private marketplace, in return
for more visible measures of accountability. In fact, Colorado
has even implemented a voucher system to fund
higher education, in which students are provided portable
grants taken with them to the institution of their
choice. Other states such as South Carolina and Virginia
have allowed the privatization of selected higher
education programs, e.g., professional schools such as
law and business. Several states such as Pennsylvannia
have moved to performance contracting, in which
universities are redefined as state-related rather than
state-owned and negotiate a contractual relationship
with state government to receive state funds for specific
purposes (e.g., educating a certain number of state residents).
Perhaps the most interesting experiment is in
Ohio, where Miami University has been allowed to set
tuition levels for Ohio residents at private (out-of-state)
levels, then discount this by the state appropriation per
student, and still further with need-based financial aid,
making quite transparent the relative dependence of
tuition on state support (Breneman, 2005).

66
In fact, this last approach is increasingly finding favor
in many quarters. As a 2004 editorial in the New
York Times explained, “With government support so
shaky, state colleges are going to need to raise their
rates. A more moderate approach might be to permit
tuition to rise to the levels now charged to out-of-state
students, while protecting those with less ability to pay
with need-based financial aid programs.” The NYT
editorial concludes, “State colleges must find a way to
fulfill the mission they were created to perform. Since
state governments have taken to starving them, their
best hope is to increase tuition for those who can afford
to pay” (NYT, 2004).
The Roadmap: The Longer Term (…But Within a Decade…)
For the longer term, our vision for the future of
higher education is shaped very much by the recognition
that we have entered an age of knowledge in a
global economy, in which educated people, the knowledge
they produce, and the innovation and entrepreneurial
skills they possess have become the keys to economic
prosperity, social well-being, and national security.
Moreover, education, knowledge, innovation, and
entrepreneurial skills have also become the primary
determinants of one’s personal standard of living and
quality of life. We believe that democratic societies–and
state and federal governments–must accept the responsibility
to provide all of their citizens with the educational
and training opportunities they need, throughout
their lives, whenever, wherever, and however they
need it, at high quality and at affordable prices.
To this end, the long-term roadmap pursues a vision
of the future in which Michigan strives to build
a knowledge infrastructure capable of adapting and
evolving to meet the imperatives of a global, knowledge-driven
world. Such a vision is essential to create
the new knowledge (research and innovation), skilled
workforce, and infrastructure necessary for Michigan
to compete in the global economy while providing citizens
with the lifelong learning opportunities and skills
they need to live prosperous and meaningful lives in
our state. As steps toward this vision, we recommend
the following actions:
1. Michigan needs to develop a more systemic and strategic
perspective of its educational, research, and cultural institutions–both
public and private, formal and informal–that
views these knowledge resources as comprising a knowledge
ecology that must be allowed and encouraged to adapt and
evolve rapidly to serve the needs of the state in a change driven
world, free from micromanagement by state government
or intrusion by partisan politics.
State education policy is far too fragmented, with
widely differing perspectives and philosophies depending
on the educational sector, e.g., K-12 responsible to
local communities and the State Board of Education,
public higher education largely the responsibility of politically
determined governing boards, private higher
education quite autonomous, and an array of cultural
organizations (museums, libraries), industrial resources
(workplace training programs, corporate R&D), and
informal learning opportunities largely out of sight,
out of mind. In a similar sense, state funding of education
tends to run on automatic pilot, determined more
by the increasingly inadequate resources provided by
Michigan’s obsolete tax structure (e.g., based on a 1950s
manufacturing economy rather than a 21st-century
knowledge-services economy) and political patronage
than carefully designed as a strategic investment in the
state’s future. It is essential that leaders of state government,
higher education, business, industry, labor,
and the public at large (through the media) view higher
education in a far more systemic and strategic fashion
as a critical resource for Michigan’s future.
Here we are certainly not recommending the creation
of more state bureaucracy such as the state higher
education coordinating boards characterizing many
other states. In fact, Michigan’s higher education “anarchy,”
guaranteed by institutional autonomy granted by
the state constitution, has proved remarkably effective
over the years in providing public colleges and universities
with the agility they need to adapt to changing
conditions such as the decline of public support and
the rise of market pressures. Many states look at Michigan
with considerable envy concerning the quality, diversity,
and cost-effectiveness of its higher- education
system, despite its relatively low level of state support
over the past two decades.
Rather we believe that more policy attention needs

67
to be given to the strategic evolution of knowledge resources
in the state, set apart from the tyranny of legislative
committees and political election cycles and more
responsive to the long-term needs of the state. In other
states, citizen groups such as business/higher education
associations have proven effective.
2. Michigan should strive to encourage and sustain
a more diverse system of higher education, since institutions
with diverse missions, core competencies, and funding
mechanisms are necessary to serve the diverse needs of its
citizens, while creating an knowledge infrastructure more resilient
to the challenges presented by unpredictable futures.
Using a combination of technology and funding policies, efforts
should be made to link elements of Michigan’s learning,
research, and knowledge resources into a market-responsive
seamless web, centered on the needs and welfare of its citizens
and the prosperity and quality of life in the state rather than
the ambitions of institutions and political leaders.
The state needs to give more strategic consideration
to the diversity among its public colleges and universities,
e.g., how many world-class public research
universities it can afford, whether regional universities
should become more focused on pre-professional
education, and better linkages between independent
colleges and public universities that exploit the unique
characteristics of each. It is important to encourage a
highly diverse educational enterprise, recognizing that
a diverse population with diverse needs will require diverse
institutions. It would be folly to force all institutions
to some lowest common denominator of quality
and capacity.
Of particular importance is achieving a better balance
between public and private higher education, a
balance that is more capable of riding out the inevitable
ebb and flow of public and private support. While Michigan
has a strong group of independent colleges, the
absence of a major private research university leaves it
more vulnerable to fluctuations in the state’s economy
than other states. Perhaps the state should explore a different
funding process for institutions such as the University
of Michigan-Ann Arbor, which has seen its state
appropriation drop below 10% of its operating budget.
For example, the state might redefine UMAA as “staterelated”
or as a public corporation or public authority
(similar to public entities such as hospital systems or
transportation authorities), providing state funding for
specific purposes on a performance contracting basis,
e.g., to support a certain number of Michigan resident
students in given fields at a fixed tuition level or research
projects in areas of key importance to the state,
and then allow the institution to determine other characteristics
that best optimize its public purpose and
market competitiveness (Newman, 2004).
3. Serious consideration should be given to reconfiguring
Michigan’s educational enterprise by exploring new
paradigms based on the best practices of other regions and
nations. For example, the current segmentation of learning
(e.g., primary, secondary, collegiate, graduate-professional,
workplace) is increasingly irrelevant in a competitive world
that requires lifelong learning to keep pace with the exponential
growth in new knowledge. More experimentation both in
terms of academic programs and institutional types should
be encouraged.
Much of the concern about the quality of higher education
arises from the general education/transitional
years, grades 11-14, when both the emotional and intellectual
maturation of students occurs. Michigan should
consider new paradigms of post-secondary “general
education.” An example is a reconfiguration of K-16
education so that secondary school grades 11-12 would
be merged with community college and lower-division
university programs focused on general education and
socialization, much like the gymnasium system in Europe
or the Fourth Form in the United Kingdom. This
would allow research universities to focus on disciplinary,
graduate, professional, and lifelong education,
while general education and socialization would be
provided by regional or independent colleges.
There is some evidence that the highly supportive,
learning-intensive residential experiences offered by independent
colleges may be the optimum learning environment
for most young students. Liberal arts colleges
seem to have the best success at this stage, providing
both a nurturing and learning-intensive environment.
Yet it is also the case that such colleges simply do not
have the resources to provide the advanced learning
opportunities of a major research university. Michigan
should experiment with the development of a “virtual

68
Oxbridge,” using technology to link independent colleges
with its major research universities.
4. The quality and capacity of Michigan’s learning and
knowledge infrastructure will be determined by the leadership
of its two AAU-class research universities, UMAA and
MSU, in discovering new knowledge, developing innovative
applications of these discoveries that can be transferred to society,
and educating those capable of working at the frontiers
of knowledge and the professions. In this sense, UMAA and
MSU should be encouraged to evolve more toward a “universitas”
character, stressing their roles as sources of advanced
knowledge and learning rather than focusing on providing
general education (or socialization) at the undergraduate
level.
Michigan is fortunate to have two world-class research
universities, UMAA and MSU, both highly regarded
as elite members of the Association of American
Universities. While these two institutions enroll large
numbers of students in high quality undergraduate
programs, their unique value to the state arises because
of their unusual capacity to conduct cutting-edge research
and provide advanced education at the graduate
and professional level, along with well-established
programs of outreach and public service ranging from
medical care to economic development. As the state
attempts to expand the number of college graduates,
particularly during a period of limited resources, it is
absolutely essential that the capability of UMAA and
MSU for research and advanced training be protected,
since in the end, it will be the new knowledge produced
on these campuses, along with the scientists, engineers,
and other professionals trained at the advanced level,
that will create the new jobs that the graduates from
Michigan’s other colleges and universities will fill.
5. While it is natural to confine state policy to state
boundaries, in reality such geopolitical boundaries are of no
more relevance to public policy than they are to corporate
strategies in an ever more integrated and interdependent
global society. Hence Michigan’s strategies must broaden to
include regional, national, and global elements, including the
possibility of encouraging the state’s two flagship research
universities, the University of Michigan and Michigan State
University, to join together to form a true world university,
capable of assisting the state to access global economic and
human capital markets.
An array of powerful economic, social, and technological
forces is reshaping the very nature of the 21stcentury
university. The emergence of a global, knowledge
driven economy has intensified the need for broad
access to advanced education and training (massification).
The economic value of the knowledge produced
by research universities continues to escalate. The rapid
emergence of low-cost yet highly sophisticated technical
services in large developing markets (e.g., India,
China, Russia) has triggered a serious concern about
the nature of university education necessary to sustain
the high standard of living of wealthy economies. Yet,
even in the face of such trends, the aging populations of
many developed nations are depending increasingly on
market forces and private funding rather than public
policy and tax support to determine the future of their
higher education systems.
Of particular interest is the way that such forces have
stimulated a number of universities–and university organizations–to
consider seriously expanding beyond
the bounds of their nation-states to become universities
both of the world and in the world, accepting a far
broader responsibility to understand and serve both the
social needs and marketplace of the global community.
Key in such strategies is the rapid evolution in information,
communication, and transportation technologies,
which are enabling entirely new global learning and
knowledge structures.
Again quoting The Economist, “the most significant
development in higher education is the emergence of
a super-league of global univesities. This is revolutionary
in the sense that these institutions regard the whole
world as their stage, but also evolutionary in that they
are still wedded to the ideal of a community of scholars
who combine teaching with research. The great universities
of the 19th century were shaped by nationalism;
the great universities of today are being shaped by
globalization. These top universities are citizens of an
international academic marketplace, with one global
academic currency, one global labor force, and increasingly,
one global language, English. Von Humboldt’s
university with its emphasis on research was one of
the transformative institutions of the 19th century. The

69
emerging global university is set to be one of the transformative
institutions of the current era. All it needs is
to be allowed to flourish.” (The Economist, 2005)
The State of Michigan is fortunate in having two
such global universities, the University of Michigan
and Michigan State University. We believe the state
should utilize these institutions to build a global presence–not
simply to explore global markets for Michigan
products and services, but also to attract talent to
our state from around the world. Both universities have
long histories of international programs of considerable
distinction and great impact. Michigan State was
an important force in the “green revolution” bringing
modern agricultural technology to the world. The University
of Michigan has had a long international presence,
producing much of the academic leadership for
Asia (including Japan and China), along with strong
ties to Europe and Latin America. These institutions are
well positioned to become major players in the global
marketplace, accepting responsibility to address many
of the great challenges characterizing our world such as
global sustainability, international conflict, and human
capital development.
Furthermore, the leadership these institutions have
provided in developing and exploiting new technologies
such as the Internet, the Michigan Virtual University,
and more recently the new generation of middleware
represented by the Open CourseWare initiative,
the Sakai Project, and Internet2, coupled with the
vast resources that will soon be available through the
Google library digitization project, raise the possibility
of building a “meta” university, international in extent
and both accessing and propagating knowledge skills
and services in a global marketplace.
6. Michigan’s research universities should explore new
models for the transfer of knowledge from the campus into the
marketplace, including the utilization of investment capital
(perhaps with state match) to stimulate spinoff and startup
activities and exploring entirely new approaches such as
“open source – open content paradigms” in which the intellectual
property created through research and instruction
is placed in the public domain as a “knowledge commons,”
available without restriction to all, in return for strong public
support.
Clearly universities have an important responsibility
to transfer the knowledge created on their campuses
into broader society to address its needs and priorities.
Transferring university-developed knowledge to the
private sector fulfills a goal of publicly funded research
by bringing the fruits of research to the benefit of society.
With this important technology transfer come
increasingly close relationships between industry and
universities.
The traditional models for such technology transfer
involve establishing ownership of intellectual property
through copyright or patent and then using licensing or
startups, coupled with a strong entrepreneurial spirit
and adequate venture capital, to stimulate economic development.
This linear approach to technology transfer
has several compelling success stories: Silicon Valley,
Route 128, and the North Carolina Research Triangle.
The federal government has encouraged such activities
with legislation such as the Bayh-Dole Act that permits
ownership and licensing of the intellectual property
resulting from federally funded research. In the
wake of Bayh-Dole, universities have mounted aggressive
efforts to capture, patent, and license intellectual
property resulting from their scholarly and instructional
activities, relying on armies of lawyers to defend this
ownership. Yet the primary intent of such government
policies has been to promote utilization of new knowledge,
not to maximize financial returns for institutions
or individuals. There remains considerable uncertainty
concerning just how universities should approach the
commercialization of the intellectual property associated
with campus-based research and instruction.
Ironically, it has been the freedom of universities
from market constraints that is precisely what has allowed
them in the past to nurture the kind of open-ended
basic research that led to some of the most important
(and least expected) scientific discoveries. Beyond the
traditional triad of teaching, research, and service (or in
more contemporary language, learning, discovery, and
engagement), it is useful to consider the products of
the university as educated people, content, and knowledge
services. Yet content, that is intellectual property,
cannot be bottled and marketed like other commercial
products. It exists in the minds of people, the faculty,
staff, and students of the university. As such, it can simply
walk out the door.

70
While disclosure, patenting, and licensing intellectual
property may be appropriate for some areas such as
the product-orientation of biomedical research, it may
not be an effective mechanism for very rapidly evolving
areas such as information technology or instructional
content. Today the increasing pace and changing
character of knowledge generation (e.g., in digital
forms), coupled with the hypercompetitive environment
of a global, knowledge-driven economy, suggest
that Michigan should not rely entirely on catching up
with other regions through conventional mechanisms,
but in addition explore entirely new models of technology
transfer.
So what other models might universities consider
for technology transfer One of the more interesting is
provided by the “open source movement” in software
development. In this model, a user community develops
and shares publicly available intellectual property
(e.g., software source code), cooperating in its development
and improvement and benefiting jointly from its
use. Perhaps the leading example is the development
of the Linux operating system, now evolving as a major
competitor to proprietary systems such as Microsoft
Windows and Unix. This “gift economy” represents an
emergent phenomenon free from a community working
together with no immediate form of recompense except
for social capital intertwined with intellectual capital.
Suppose public universities could be persuaded
that in return for strong public support, they would
regard intellectual property developed on the campus
through research and intellectual property as in the
public domain. They could encourage their faculty to
work closely with commercial interests to enable these
knowledge resources to serve society, without direct
control or financial benefit to the university, perhaps by
setting up a “knowledge commons” environment adjacent
to the campus (either geographically or virtually)
where technology transfer was the primary objective.
This might be just as effective a system for transferring
technology as the current Bayh-Dole environment for
many areas of research and instruction. Furthermore,
such an unconstrained distribution of the knowledge
produced on campuses into the public domain seems
more closely aligned with the century-old spirit of the
land-grant university movement. In fact a recent issue
of The Economist mused that “some zealots even argue
that the open-source approach represents a new, postcapitalist
model of production.”
7. Michigan should explore bold models aimed at producing
the human capital necessary to compete economically
with other regions (states, nations) and provide its
citizens with prosperity and security. Lifelong learning will
not only become a compelling need of citizens (who are only
one paycheck away from the unemployment line in a knowledge-driven
economy), but also a major responsibility of the
state and its educational resources. One such model might
be to develop a 21st-century analog to the G.I. Bill of the post
WWII era that would provide–indeed, guarantee–all Michigan
citizens with access to abundant, high-quality, diverse
learning opportunities throughout their lives, and adapts to
their ever-changing needs.
Of course, major undertakings in anticipation of opportunities
are always difficult, but the United States
has a history of rising to such occasions. At least twice
before in times of great challenge and opportunity, the
federal government responded creatively with novel
programs that not only served the needs of society,
but also reshaped institutions. In the 19th century the
Land-Grant Acts not only modernized American agriculture
and spearheaded America’s response to the industrial
revolution, but also led to the creation of the
great public universities that have transformed American
society. Following World War II, the G.I. Bill and
the government-university research partnership were
instrumental in establishing the nation’s economic and
military leadership and creating the American research
university, which has sustained U.S. leadership in the
production of new knowledge and the creation of human
capital.
The current challenges to Michigan’s prosperity
and social well-being call for a bold initiative of similar
magnitude. It is not enough to simply build upon
the status quo, for example by doubling the number of
post-secondary degree recipients or guaranteeing at a
minimum a community college education for all. Instead,
we suggest that Michigan consider a bolder vision
that would provide all Michigan citizens with pervasive
opportunities for education, throughout their
lives, which address both their needs and aspirations
while reflecting the imperatives of a rapidly changing

71
world. While such a commitment would challenge existing
public polices and politics, only an effort to build
a true society of learning for the 21st century can recapture
the economic and social leadership that Michigan
possessed in earlier times.
The key would be to develop portable benefits and
opportunities for lifelong learning, consistent with the
need to make workers mobile and adaptable during
an era in which career-long employment with a particular
company or even in a particular career becomes
increasingly unlikely. Given that reality, argues Robert
Lawrence at Harvard, it becomes increasingly important
for society, to the extent possible, to make benefits
and education, the two key ingredients of employability,
as flexible as possible. Just as creating legal and institutional
frameworks for the universal portability of
pensions and health care was the key to Social Security
and Medicare, a similar goal might be posed for 21stcentury
lifelong learning, e.g., establishing a 401(k) taxdeferred
savings program for further education (Friedman,
2005).
To this end, a first step would be for Michigan to
top off the federal Pell and Hope scholarship aid with
state-funded scholarships so that any student in a family
earning less than $100,000 (or perhaps under top
10% in income) will have access to the first two years of
higher education free, at the level of cost of the lowest
public univer-sity (with no discrimination whether student/family
chooses public or private school), with any
amount not used by the student made available to help
pay for the last two years. Given the very large returns
to individual/family (as well as state and nation from
each year of higher education) this would at least provide
one way to assure full access for two years without
regard to income and then require students/families to
bear more of the cost for reaping benefits for going on
with higher education. If this were funded by a separate
stream of dedicated funding (along with match
for higher education research, whatever base funding
from state to publics, and letting tuition and in-state/
out-state numbers float at the discretion of each institution),
it would send the signal that the state’s money
was invested in higher education opportunities while
providing appropriate autonomy to each institution.
(Dimond, 2005).
Peter Drucker has suggested an alternate approach
to financing a college education: “The basic problem of
American higher education is that traditionally it has
been priced no differently from the way food, soap,
or shoes are priced. Customers pay in full when they
take delivery of the merchandise. But a college education
is not a consumer good that will be used up and
gone within a short time. It is a long-term investment in
the lifetime earning power of the graduate” (Drucker,
1991).
To the degree that a college education is in reality
a long-term investment in the future, perhaps we
should look at it as we would other major investments
we make in our life. For example, we borrow money to
buy an automobile and a house, and we pay off these
loans over long periods of time, even as we enjoy the
purchase. A college education seems to fit this model,
since not only does it improve one’s quality of life, but
it enhances one’s earning capacity, thereby enabling the
borrower to better pay off the loan.
Drucker proposes shifting the payment for a college
education from the “front end,” when most students
have no money and next to no earning power, to a later
period when their incomes are sizable and rapidly rising
(Drucker, 1991). In particular, those students choosing
to pay later rather than at the time of enrollment
would agree to have the installments paid through payroll
deduction. They also would be required to take out
twenty-year term life insurance for the amount of the
outstanding liability; premiums for such insurance at
the age of young college students are minimal.
With these steps, the repayment claim for the investment
made by the college in the future earning power
of the student becomes a marketable security, bearing
little risk and a fair rate of return. The former student,
now a wage earner, could carry the annual payment.
The graduate’s family would have little or no financial
burden at all. The college could be certain of being paid,
and it could charge what it needs to build faculty and
curriculum and still not price itself out of the market.
To carry this one step further, perhaps as a society
we should look upon a college education as we do our
Social Security system. We could restructure federal
student loan programs to facilitate payment through
payroll deduction, just as we do today for Social Security
programs. An alternative would be to use payroll tax
mechanisms, using the Internal Revenue Service as the

72
collection agency. The basic idea is to shift the burden
for the support of higher education from the previous
generation to the generation of students that benefit
most directly, but at a time in their lives when they can
afford these costs.
In a sense, the Higher Education Act of 1992 did just
this with the Ford Direct Lending Program. This program
allows students to receive their education loan
funds directly from the federal government via their
colleges and universities, thereby eliminating much
of the cost and bureaucracy of the commercial loan industry.
But equally significant is the fact that the direct
lending program provides an opportunity to base repayment
rates on future income and repayments collected
through income tax withholding, thereby reducing
much of the risk associated with financing a college
education. Like the national service initiative launched
by the Clinton administration in 1996, income-contingent
loan repayment is designed to ease the debt burden
on college graduates, perhaps encouraging them
to seek employment in fields of urgent national need
such as teaching, public health, and community development.
Of course such approaches require a major change
in public attitudes toward the value of a college education.
The direct lending program, although supported
by students and parents, was strongly opposed by the
banking industry. Yet in the end it has survived, in part
because of the recognition that the increasing value of
a college education, both to an individual and society
more broadly, requires the exploration of new financing
mechanisms.
In summary, as both a nation and a state, we should
reaffirm that higher education represents one of the
most important investments a society can make in its
future, since it is an investment in our people. We are
fortunate today to have one of the finest systems of
higher education in the world, but we also remember
this has resulted from the willingness of past generations
to look beyond the needs and desires of the present
and to invest in the future by building and sustaining
educational institutions of exceptional quality—institutions
that have provided many of us with unsurpassed
educational opportunities.
We have inherited these institutions because of the
commitments and sacrifices of previous generations.
Today it is our obligation as responsible stewards—and
as responsible parents—to sustain these institutions
to serve our children and our grandchildren. It seems
clear that if we are to honor this responsibility to future
generations, we must reestablish the priority of both
our personal and our public investments in education,
in the future of our children, and in the future of our
state.
Clearly it is in Michigan’s interest to provide educational
opportunity to all with the desire and the ability
to learn. If we are to achieve this object, we must halt
the erosion in public support of higher education and
once again reaffirm the commitment from one generation
to the next that has characterized our state.
One Final Recommendation: A Call for Leadership
8. Michigan should develop a leadership coalition–
involving leaders from state government, industry, labor,
education, and concerned citizens–with vision and courage
sufficient to challenge and break the stranglehold of the past
on Michigan’s future!
This is such an obvious need that no further comment
is necessary…

73
Chapter 7
A Broader Agenda
A roadmap is just that: a set of possible directions
to the future. But leaders in both the public and private
sector require a more definitive operational plan
that addresses key questions such as: What are the first
steps to be taken What policy actions are necessary
Are there follow-on studies that need to be commissioned
Furthermore, while our effort has focused on
developing a roadmap for building a regional knowledge
economy in Michigan, it is clear that our vision
and our recommendations are highly dependent upon
issues in other areas, e.g., federal policy, market forces,
and the global economy. Finally, we acknowledge that
this roadmapping study has been stated in straightforward–sometimes
even blunt–terms. To survive in the
political environment of state (and federal) policy, it
must be reclothed in more Machiavellian garb.
The initial goal of this roadmapping effort is to shift
the public conversation away from distracting issues
such as Balkanized state politics, culture wars, and bitterly
partisan battles to focus instead on the imperatives
of a knowledge economy: lifelong learning, research
and innovation, and knowledge-age infrastructure.
Our message is deceptively clear:
1. Knowledge and innovation are the drivers of the
global economy today and tomorrow.
2. The key inputs to knowledge and innovation are:
lifelong learning (human capital), new knowledge
creation (R&D, innovation), and the infrastructure
that supports these two (schools, colleges, research
centers, cyberinfrastructure).
3. Public policy and public investment at the state
level are critical in developing each of these three
capacities. The states and regions that understand
this imperative and do it best will be best positioned
to succeed in the future. Those that fail will
become economic backwaters.
Since public commitments and government action
are the longer-term key, it is important to lay out a possible
agenda for state leaders, the more specific the better.
It is important that state policy makers begin to consider
new financing and governance issues within the
context of future state needs and priorities rather than
past political party ideologies.
Most important, state government has to begin by
getting its fundamental responsibilities aligned with
the needs of a knowledge economy:
1. Empowering families, students, workers with the
responsibility and the resources to choose lifelong
learning opportunities that they determine will be
best for themselves, including early childhood, K-
12, postsecondary, and continuing education.
2. Providing the infrastructure and the investments
necessary to attract federal and private research
funding and stimulate innovation and entrepreneurial
activities.
3. Developing a tax structure that generates revenues
adequate to fund both current obligations and the
necessary investments in the future with the lowest
tax rates and broadest base and mix of taxable
activities.
In this chapter we first explore some of these related
areas. We begin with several of the policy areas that are
key to the effectiveness of the roadmapping effort.

74
Prosperity, Security, and Social Well-Being
in a
Global, Knowledge-Driven Economy
Restructuring
Michigan’s Tax Base
for a Knowledge Economy
Federal R&D
Policy
Reforming Michigan’s
Political Parties
Michigan
Roadmap
Federal Health Care
Policy
State and Federal
Higher Education Policy
“Who pays”
“Who benefits”
Achieving World-Class
K-12 Education
Related Policy Issues
State Government
Clearly many of the policy issues reflected in the
roadmap are closely related to important challenges
in Lansing itself–a state government unwilling to provide
adequate leadership or investment in the future,
overly constraining institutional actions necessary to
cope with an increasingly competitive marketplace,
and apparently characterized by an almost total lack
of understanding of the realities and role of education
and innovation in a knowledge society–with most of
the state’s private sector leadership and media sitting
on the sidelines, largely silent if not clueless concerning
the key challenges facing Michigan.
Related to these issues is the increasing irrelevance
of Michigan’s political parties to the realities of our
present and the challenges for the future. Both political
parties are largely trapped in the past, driven by the
desire to protect old sacred cows (e.g., big business, big
labor, big government, and wealthy campaign contributors)
or by “value-morality” ideologies (abortion, gay
rights, creationism) that are distracting public leaders
and public attention from what really matters in a 21stcentury
global economy. As citizens, we simply must
demand that our public leaders stop backing into the
future, clinging to the practices and expectations of an
obsolete past, and instead face up to the actions, commitments,
and sacrifices that will be necessary to rebuild
Michigan’s strength and prosperity in a radically
different future.
A recent statement from the Michigan League of
Women Voters states our current dilemma well: “Government
is becoming increasingly irrelevant as it shrinks
due to reductions in tax rates and revenues. Essential
services are being cut and citizens are losing hope in the
prospect that government will protect and support opportunities
for people to improve their lives. This trend
erodes citizens access to government more than any development
we have observed since we began this series
of reports.” (Milliken, 2005).
Little wonder then that a coalition of concerned
citizens has recently launched an initiative aimed at
forcing the Michigan State Legislature to consider legislation
that would lock in to the state budget annual
funding increases for K-16 public schools, colleges, and
universities at the inflation rate. The K-16 Coalition for
Michigan’s Future (K-16 Coalition for Michigan’s Future,
2005) has notified the Legislature that if they fail
to pass this initiative, they are prepared to bypass them
and go directly to the voters on the 2006 ballot. In view
of the unwillingness of state government to adequately
fund public higher education in the state in recent years,
such a voter-driven initiative may be the only way to
break the political logjam and begin to re-invest in the
state’s future, even if it would force the state to adopt
tax increases to adequately fund education.
State Budgets and Tax Policy
Equally serious is the need to restructure an obsolete
tax system, designed for a 1950s factory-based manufacturing
economy rather than a 21st-century knowledge

75
economy, and restore both integrity and responsibility
to the state budget process. To be sure, a weak economy
coupled with the burden of unfunded federal mandates
has destabilized the state budget process. Of particular
concern is the rapidly growing burden of Medicaid, a
consequence largely of the federal government’s inability
to come to grips with a growing uninsured population
and the urgent need for universal health care in our
nation. As recent studies have suggested, the economic
burdens of the unfunded Medicaid mandates passed
onto the states by the federal government have now
surpassed the entire public education budget (both K-
12 and higher education) in the majority of the states.
(Kane, 2003).
But much of the damage to Michigan’s budget was
self-inflicted. As PCSUM president Michael Boulus
notes, “Contrary to popular belief, the cuts in state supending
of the last five years are not relaly the result
of our state’s economic decline. They are primarily the
results of decisions to cut taxes and cut investments in
Michigan’s intellectual, social, and physical infrastracture–and
our future” (Boulus, 2005).
During the 1980s, Michigan launched a massive prison
construction program, in response both to ill-considered
sentencing guidelines and pandering to public
concern about crime. In the early 1980s, Michigan had
15 public universities and 8 prisons; today we still have
15 public universities, but now 35 prisons. In fact today
the average cost per inmate is roughly five times that of
the state appropriation per student in Michigan’s public
universities. As a result, state spending on prisons
surpassed that for higher education in the early 1990s
and today sits as yet another effective mandate for state
tax dollars. Similarly, Michigan’s school finance reform
effort of the 1990s created K-12 education as yet
another funding mandate, which along with Medicaid
and prisons, leaves little for higher education, which is
still treated as a discretionary budget item. As a consequence,
over the last several years, no state activity
has been cut as much as the funding for public higher
education.
The structural deficiencies in the state budget were
compounded during the 1990s, when during a period
of relative prosperity that should have provided state
government with the opportunity to restructure its antiquated
tax system and begin to invest in its future by
restoring funding for key priorities such as higher education
and infrastructure, Michigan instead decided to
cut its tax rate. This has created a permanent budget
deficit that is likely to worsen each year as Michigan’s
foundering economy continues to weaken, while an aging
population and a growing population of uninsured,
coupled with the rapid increases in health care costs,
drive Medicaid burdens into the stratosphere.
Today Michigan is spendng a smaller percentage
of its total personal income on government than it has
at any time in the last decade. Again to quote Boulos,
“Some of our political leaders say tax cuts are needed
to maket the state more competitive, because they contend
that Michigan is a high tax state. That is just not
true. Michigan’s 2005 total state and local tax burden is
10.2%, ranking it 21st in the nation, in the middle of the
pack.” While it is true that some states like Mississipi,
Alabama, and Arkansas have lower taxes, economic
powerhouses like California, New York, and Massachusetts
have higher taxes. Put another way, Michigan
has consciously chosen to cut taxes, cut government,
cut support of education, and cut its investment in the
future. (Boulus, 2005)
Michigan finds itself simply unable to meet both its
obligations for the present (e.g., Medicaid, corrections,
K-12 education) while investing adequately in its future
(e.g., higher education, research and innovation,
knowledge infrastructure). A term-limited state government,
increasingly manipulated by special interests
and subject to the narrow agendas of political parties,
has been unable to restructure an obsolete tax system,
designed for a factory-based industrial economy that is
no longer dominant in our state. Even today most of
Michigan’s economic activity involves knowledge-intensive
services–e.g., financial services, health services,
and professional services such as law and management,
generating revenue that is not included in Michigan’s
tax base. All too frequently both state and local governments
tend to use tax abatements to bail out or attract
traditional industries rather than investing in the creations
of the new knowledge-driven business capable
of competing in tomorrow’s global economy.
From a more cynical viewpoint, there is absolutely
no evidence whatsoever that cutting state taxes has a
positive economic impact–although to be sure in the
current anti-tax climate, it may generate votes. What is

76
certain however, is that cutting investments in education,
innovation, and knowledge infrastructure is crippling
in a knowledge economy. As Bill Gates stresses,
“The IT and biotech industries are far more sensitive to
quality of talent than incentives. California is No. 1 not
because they have the most friendly tax policies there.
If you’re coming up with a breakthrough in medicine,
it doesn’t matter if you’re paying a little more in taxes.”
(Gates, 2005).
While any discussion of the “t” word is usually
banned in Lansing, it has become increasingly clear
that without a major restructuring of state tax policy,
Michigan will simply be unable to balance the obligations
created by mandates for state funding with the
necessary investments in its future. Future generations
will bear the burden of our indecision and myopia.
Politics As Usual
In a speech remarkable for its wisdom and its courage,
former Governor William Milliken challenged
a gathering of poltical, civic, and cultural leaders at
the 2005 meeting of the Detroit Regional Chamber on
Mackinac Island about the “anger, bitterness, and noise
that were leaving Michigan in the dust”. Milliken deplored
the divisive politics that increasingly have dominated
both state and federal government, swamping
efforts to develop good public policy. As he observed,
“We have seen a growth of meanness, of bitterness,
and of excessive partisanship that can only work to the
detriment of the region, the state, and the nation. The
focus has turned to winning elections rather than to developing
responsible public policy. Too often the focus
on winning boils down to just raising the most money
and apealing to the worst instead of the best in people.”
(Milliken, 2005).
Governor Milliken gave numerous examples of partisan
politics digging Michigan into even a deeper hole:
the 1980s overexpansion of the state’s prison system
driving an explosion in the costs of corrections ($1.9 billion),
the ill-considered tax cuts of the 1990s that have
permanently unbalanced the state budget, the devastating
cuts in appropriations to public universities (20% to
40%), and the inability to develop a vision and implement
a strategy to invest in Michigan’s future. In fact,
the current political gridlock in Lansing has become so
entrenched that many public leaders have simply given
up, assuming that serious tax reform or achieving a better
balance between current obligations (e.g., prisons)
and investments (e.g., higher education) was out of the
question.
As Governor Milliken observed, “We have developed
a culture in our society in which some politicians
pand endlessly and shamelessly to cut taxes. Then,
when we run into a budget crunch, we start cutting the
absolutely vital and essential services this state needs
to compete effectively in the 21st-century world. We
think it would be political suicide to suggest the need
for additional resources to preserve the level of excellence
that we have known in the past and that we must
have in the future. Too many people in public life are so
obsessed with being re-elected tha they are paralyzed
in addressing urgent issues.”
He concluded by noting further that “When an election
is over, it is over. There is nothing in the U.S. or
state constitutions that call upon elected officials to be
total partisans. Instead, those documents implore us to
recognize that if we hold public office, we should be
about the people’s business, and not personal partison
agendas.
This is strong medicine. However it is badly needed
to remedy the partisan gridlock that is crippling our
state.
K-12 Education
Clearly the quality and performance of K-12 education
is a very critical issue for our state. As the resource
map of Michigan’s educational capacity makes
painfully apparent (Chapter 3), our state’s educational
achievement at this level is seriously inadequate and
must be improved dramatically if Michigan is to build a
workforce of world-class caliber. While state initiatives
such as charter schools and federal accountability measures
(“No Child Left Behind”) will have some impact,
these are largely at the margin because of far more significant
socio-economic issues such as the deterioration
of the family and community environment for learning
and the student (and family) motivation for academic
achievement. Of comparable importance is the teaching
workforce itself. It is here that higher education (and
our society) simply must do a better job of attracting

77
the best and brightest into teaching careers and providing
them with the quality education, attractive pay, and
support necessary for these important roles.
Although these are issues that go beyond the range
of the Roadmap, we do suggest that there may need to
be serious consideration given to a restructuring of both
K-12 and early undergraduate education. For example,
the United States is unique in ending secondary education
at the 12th grade and relying on college to provide
both the socialization and intellectual maturation necessary
for true college level work, generally packaged
in a general education program in the first two years
of undergraduate studies. In Europe and Asia, secondary
education is extended (e.g., the gymnasium system
in Germany or the Fourth Form system of England) to
provide the opportunity for socialization and general
education studies so that students enter the university
already prepared for advanced work in the disciplines.
This allows their universities to be “knowledge-centered”
rather that “student-development-centered,” an
important characteristic that aligns well with the demands
of a global, knowledge-driven economy. It also
places the university more strategically into the context
of a lifelong-learning approach.
Broader Educational Policy Issues:
Who Pays Who Benefits
There are an array of broader issues of educational
policy that require careful consideration and debate
within our state. Among the most important are the
classic questions of “Who pays” and “Who benefits”
For example, as the economic return on a college education
continues to rise in the knowledge economy, do we
need to consider a different mix of sharing in paying
for college between students (and parents), the state,
the federal government, and employers (business and
industry) One might well argue that those who benefit
most–the student and perhaps even employers–should
accept more responsibility for investment in higher education,
perhaps aided by effective state or federal loan
programs, rather than viewing higher education as a
social good primarily supported by tax dollars (which
applies, of course, for BOTH public and private universities
because of tax policies on charitable giving). Even
today two-thirds of all support for higher education in
America comes from private sources (e.g., tuition and
charitable giving), creating a strong market influence
on colleges and universities.
There is a deeper issue here. The American university
has been seen as an important social institution,
created by, supported by, and accountable to society at
large. The key social principle sustaining the university
has been the perception of education as a public good--
that is, the university was established to benefit all of
society. Like other institutions such as parks and police,
it was felt that individual choice alone would not sustain
an institution serving the broad range of society’s
education needs. Hence public policy dictated that the
university merited broad support by all of society, rather
than just by the individuals benefiting from its particular
educational programs, through direct tax subsidy
or indirect tax policies (e.g., treatment of charitable
giving or endowment earnings).
Yet, today, even as the need of our society for postsecondary
education intensifies, we also find an erosion
in the perception of education as a public good
deserving of strong societal support. State and federal
programs have shifted from investment in the higher
education enterprise (appropriations to institutions or
students) to investment in the marketplace for higher
education services (tax benefits to students and parents).
Whether a deliberate or involuntary response to
the tightening constraints and changing priorities for
public funds, the new message is that education has
become a private good that should be paid for by the
individuals who benefit most directly, the students.
Government policies that not only enable but intensify
the capacity of universities to capture and market the
commercial value of the intellectual products of research
and instruction represent additional steps down
this slippery slope. Our society seems to have forgotten
the broader purposes and benefits of the university as a
place where both the young and the experienced could
acquire not only knowledge and skills, but the values
and discipline of an educated mind, so essential to a
democracy; an institution that defends and propagates
our cultural and intellectual heritage, even while challenging
our norms and beliefs; the source of the leaders
of our governments, commerce, and professions; and
where new knowledge is created through research and
scholarship and applied through social engagement to

78
serve society.
To survive in this brave new world of constrained
state support with quality intact, a situation likely to
last for at least a generation, many of the best public
universities have decided to move toward high-tuition,
high-financial-aid policies in which state support becomes
correctly viewed as a tax-supported discount of
the price of education that should be more equitably
distributed to those with true need. The leading public
universities may increasingly resemble private universities
in the way they are financed and managed. They
will use their reputation, developed and sustained during
earlier times of more generous state support, to attract
the resources they need from federal and private
sources to replace declining state appropriations. Many
institutions will embrace a strategy to become increasingly
privately financed, even as they strive to retain
their public character. Not that those public universities
with the political capacity to move to high-tuition highaid
models will suffer, since the marketplace teaches
us that high quality is frequently far more competitive
than low cost (the Lexus sells better than the Neon!).
It is important here to get the key issues onto the
table and into public discourse. How can a state responsibly
and effectively maintain high quality colleges
and universities, which are distinctive in terms
of their mission to provide the needed education, research,
and service to Michigan citizens, when an aging
population insists on other social priorities (health care,
prisons, tax cuts) How can a state simultaneously sustain
these universities’ comprehensiveness in terms of
student body, programs, and statewide responsibility
What happens when the state becomes a truly minority
shareholder in the university, contributing 10% or less
of its resources or capital facilities Do state taxpayers
then deserve to own the university and dictate its role,
character, and quality Will such privately supported
public universities have the necessary autonomy, integrity,
and freedom from political interference and
bureaucratic controls Or will the centrifugal forces of
political and educational regionalism, the tempting but
destructive urge to involve higher education in partisan
politics, prevail, allowing the distinctive role of the
public research university to deteriorate, and pulling
down as well the quality of all public higher education
in the state.
Yet it must also be acknowledged that without
some form of accountability to the body politic, the
public purpose of the university is also at risk. If as a
state or a nation we are to balance the importance of
values and public purpose in the face of the marketdriven
priorities of profit, one needs to get this on the
table for public consideration. But this will not happen
until public leaders first recognize that they must allow
higher education to adapt to the demands of the
marketplace (e.g., by acknowledging the inevitability
of high-tuition/high-financial-aid models for public research
universities), and to recognize further that they
have the capacity to influence these markets to value
once again the public purpose and social engagement
of our institutions. They must strive for a better balance
between autonomy and accountability, at least for flagship
public research universities, else the marketplace
will sweep over them, eroding away their quality and
capacity to serve, established long ago during more
prosperous–and enlightened–times.
Cultural Challenges
Even if we manage to close the gap between Michigan
today and our vision for tomorrow, there remains
one very serious threat standing in the way of our continued
progress. As the cartoon character, Pogo, once
observed: “I have seen the enemy, and he is us!” Along
with our strengths, Michigan continues to have some
serious weaknesses—some embedded in our history.
1. Deteriorating social foundations: In a period of
intense change, all of us, and especially our children,
need the security of strong families and communities.
Yet these foundations continue to erode and we see the
effects in our classrooms and dorms as well as in all the
youth who fall by the wayside, their mindpower gone
to waste.
2. Divisions: Nothing is more corrosive of our way
of life than the growing divisions in our society—by
race, ethnicity, class, age, religion, political beliefs, and
socioeconomic class. These are taking an increasing toll
on our ability to study, work and live together and to
take part in productive civil discourse. If we do not address
continuing inequality, persistent poverty, mutual

79
distrust, nothing else we do can possibly succeed. Furthermore,
at a time when we are engaged in an historic
debate about America’s and Michigan’s future, our
public discussion too often is distorted by noise blame,
paranoia, wishful thinking, stridency, unreasoning
rage, and even at times pure hate. If we want to make
sound and reasoned decisions, we have to lower our
voices and restore mutual trust.
3. Populism: We also may be experiencing the same
forces of populism that rise from time to time to challenge
many other aspects of our society–a widespread
distrust of expertise, excellence, and privilege (the Forrest
Gump syndrome). Dr. William Hubbard, former
CEO of Upjohn, used to point to one of the great character
flaws of the Midwest as “our extreme intolerance
of extraordinary excellence.” Unfortunately, many universities,
faculty, university administrators have made
themselves easy targets by their arrogance and elitism.
4. Commitment to excellence: Americans are addicted
to a pernicious vice. Especially in hard times.
Too often we are suspicious of, even hostile to, excellence
and high achievement, particularly intellectual
achievement. We settle for the lowest common
denominator rather than honoring and supporting
achievement. You would think that the one lesson we
should have learned during the 1980s–in Michigan of
all places–is the importance of quality in everything we
do, in everything we buy, sell, and produce. It is this
culture of competence–a set of attitudes, expectations,
and demands–that is often missing in America today.
Ultimately, competence requires that people and institutions
be held accountable for their performance.
Competition helps improve performance. But too often
we spend our time trying to protect ourselves from accountability
and competition.
5. Still penny-wise but pound-foolish: We also see
these character flaws when it comes to key investments
in our people, such as education and worker training.
We seem hell-bent on insisting on bargain-basement
prices, even if it means bargain-basement quality in
the performance of our institutions or products and
services. A few years back–at the time of another administration
in Lansing, a prominent state official once
proclaimed that quality was a luxury that students had
no right to expect from a public university. If students
and parents wanted quality, they could pay the extra
price to go to a private university. Worth noting is the
guy who said this had gone to Harvard, suggesting that
this was his version of “let them eat cake.” This is a long
way from the Jeffersonian ideals of our founders, who
believed that only the best was good enough for their
children, whatever their background or social status, so
long as they had the ability and will to achieve. We can
no longer afford the luxury of mediocrity in anything
we do. Our competitors in the flat world will cut us no
slack! Isn’t it time, as the Ford ad used to say, we make
quality “job number one” in other critical aspects of life
such as in educating our children
6. An entitlement culture: We also need to take a
harder look at state spending policy more generally, to
ask the important question: What is the role of state
government and how should resources be allocated
For decades Michigan was fabulously wealthy. We developed
a culture of expensive practices, entitlements,
and expectations: employee benefits, health care, social
services, litigation. Yet today, as Michigan’s economy
attempts to adjust to the brave, new world of a
knowledge-driven society, it still attempts to support
a Cadillac appetite on a Ford income. We are still not
investing our resources strategically. We are tending
to deploy them to pay for past sins (corrections, social
services, entitlements), to sustain and perpetuate the
past (tax abatements), or to sustain our personal desires
(through the tax cuts that have decimated state budgets
and services) rather than investing in the future by creating
new skills, new knowledge, and new jobs. This
is a burdensome habit for which we can blame no one
but ourselves. We are consuming today the resources
that will be needed for tomorrow. Too few are willing
to make the sacrifices necessary to secure the future in
the way that our ancestors made to provide us with opportunity,
prosperity, and security.
7. The “Not on My Watch” syndrome:
It is alarming how few of Michigan’s leaders in the
public or private sectors are willing to step forward
to address the looming challenges or take the actions

80
necessary to secure our state’s future. “Defer, delay,
procrastinate.” Those are the watchwords of today. No
need to deal with tax reform now. Let the next Legislature
deal with it. Gas prices zooming to $3 and up
Let’s introduce a few more big SUV and truck models
since surely there are a few folks out there who don’t
mind paying a big fraction of their paycheck at the
pump. The next team of executive officers at GM (or
Ford or Chrysler) can handle the challenge of restructuring
our company to build fuel-efficient cars. Besides,
by the time that federal fuel efficiency requirements or
the marketplace demands 50 mpg cars–or the inability
of tax revenue to adequately fund both obligations and
investments forces Michigan still further down an economic
spiral toward Mississippi)–we’ll be long-gone,
retired and playing golf in Florida. It will be someone
else’s problem. (Unless, of course, Florida is under water
by then…)
Some Lessons from the Past
Our state and nation have called upon some generations
more than others for exceptional service and
sacrifice, to defend and preserve our way of life for future
generations, from taming Frontier America and the
Revolutionary War to the Civil War, securing through
suffrage the voting rights of all of our citizens, World
Wars I and II, and the Civil Rights Movements. Americans
have always answered the call. Now no less than
in those earlier struggles, our generation must rise to
the challenge to serve. To understand better what we
must do, it is interesting to remind ourselves of Michigan’s
past, perhaps best articulated by passages from
Bruce Catton’s Centennial History of Michigan (Catton,
1962):
“Michigan as a state grew up in the belief that abundance
is forever. Michigan’s abundance of furs brought
the early trappers and traders. An abundance of forests
drew lumberjacks who reduced the pines to stumps and
sawdust. The state held an abundance of iron ore and copper
and developed new means to move men and goods at
an ever-faster pace, until it too ran out, and the mines
closed. Then cheap labor and mass production led to the
birth of a new industry, automobiles, that dominated the
state for over a century, until it also encountered other
parts of the world that were just as inventive, and had
even cheaper (and higher quality) labor.
The idea that abundance was “inexhaustible”—that fatal
Michigan word—dominated thinking about the state
from its earliest days. Unrestrained exploitation of natural
resources, from beavers to pine trees to iron and copper
ore, led eventually to unrestrained exploitation of human
beings. A belief in unlimited resources simply creates a
set of unlimited desires. This is the incalculable, explosive
fact that lies just below the surface in American life.
In Michigan, perhaps more clearly than in other
states, can be seen the enormous increase in the speed of
society’s movement, the pressures that come when a society
adjusted to one era is suddenly compelled to shape
itself to an entirely new one, the torment of modern man
torn by the astounding discovery that the things he makes
have taken charge of his life. Without intending anything
of the kind, man discovers that he is involved in an enormous
revolution, simply because the power in his hands
is so vast that its mere existence turns the world upside
down.
Fully characteristic of a society whose desires became
ever more insistent as the possibility of satisfying them
increased was a demand for more speed and flexibility of
movement. Michigan was above all other things a prodigal
society; inevitably so, in view of the base on which it
was built. The bounty was going to last forever, and if you
threw something away, you could always replace it with
something better.
Nothing was planned; people just took a chance. Here
was the state that gave away great forests and iron ranges,
with the carefree liberality of a sailor on shore leave, in order
to get railroads built, with the abiding that everything
would be justified in a great tomorrow. The problem is
characteristic. The whole organization of society is keyed
to a means of transportation that must, some day, run
out of gas.
A society whose lusty tradition of individualism and
firm belief in the equality of all men were both based on
that frontier ability is likely to flounder when conditions
change. A society that is based on a firm conviction that
there is a blessed abundance of good things and that the
supply will never fail is under the most profound pressure
to justify its faith by good works. If it fails to do this,
it will explode. For the modern world is one in which all
stakes are raised to infinity; win it all or lose it all, in this

81
or the next generation.”
A Final Challenge
To be sure, it is difficult to address issues such as
developing a tax system for a 21st-century economy,
building world-class schools and colleges, or making
the necessary investments for future generations in the
face of the determination of the body politic to cling tenaciously
to past beliefs and practices. Yet this is what
leadership is all about. It is time for state government
and leaders in the public and private sector to admit to
themselves and explain to the public that without a restoration
of an adequate tax base, Michigan is well on its
way to becoming Mississippi, a backwater filled with
the rusting hulls of a obsolete manufacturing economy
while other states and nations make the investments to
move into the knowledge economy. After all, taxes are
the price we all must pay for a civil society. To be sure,
this might infuriate some–particularly among the affluent
who benefit most from this “cut my taxes now;
I’ll worry about my kids later” mentality, and who will
eventually pack off and retire in Florida, taking their
tax-cut windfalls with them. It might also lose some
votes. But what is the purpose of leadership if all one
does is leave behind a legacy of poverty and hopelessness
Unlike most states, Michigan has no alliance of
business, labor, higher education, and public leaders
to push for the future of the state. Instead, narrowly
focused special-interest groups have captured control
of the political parties and public policy process (e.g.,
labor-left, religious-right, neo-cons). They are running
the train off the track, blocking any effective efforts of
strategic action. Only the narrowest of political initiatives
is able to get any traction (e.g., bans on gay marriages
or affirmative action).
It is time that someone sounded the alarm: Michigan
is falling apart! It is rapidly losing its ability to compete
in the economy of the future. We have only a short time
to make the moves that will allow us to stay competitive!
To face the opportunities, challenges, and responsibilities
of an increasingly uncertain future, Michigan
needs to rekindle the spirit of adventure, creativity, innovation,
and boundless hope in the future that has
characterized its history. During its early years, its frontier
spirit was sustained by a sense of optimism and excitement
about the future and a relish for change. Today
this same spirit seems most appropriate for Michigan’s
future.

82
Chapter 8
Epilogue
Michigan is not alone in facing the challenge of
disruptive economic and technological change. From
Pennsylvania to Minnesota, Cleveland to Detroit to
Chicago, the questions are the same: In an increasingly
knowledge-driven global economy, what will replace
factory-based manufacturing as the economic engine
of the midwestern states While these states benefited
greatly in the past from being the manufacturing center
of the world during the 20th century, today’s global
phenomena such as outsourcing and off-shoring have
destroyed the viability of low-skill, high-wage manufacturing
jobs–and even many high-skill service activities–as
a source of prosperity and social well-being, at
least in developed nations such as the United States.
In today’s economy, any metropolitan region in the
world can be a locus for knowledge work. In a wired,
interdependent global village that allows people to
choose where to live and work and where to make
goods and services, metropolitan regions are now engaged
in a pitched battle to identify and nurture their
unique economic advantages. An emerging and less
understood reality is that macro-economic regions are
increasingly the locus of economic might, exemplified
by the world’s strongest economic regions: North Central
Europe, the West Coast, and the Northeast Corridor
in the U.S. As Michel Rivoire, a biotech executive, notes,
“Today it takes 20 million people to make a good fight
in the world” (Austin, 2005).
The Great Lakes region–the “necklace” of states and
metropolitan areas that rim the lakes’ shores and anchors
the Midwest–was once the economic engine of
our nation and the world. Today, as a recent Brookings
Institution study put it, “this economic giant stands
with one foot planted in a waning industrial era, another
foot striding the emerging global knowledge economy.”
One can make a case for a Great Lakes regional
identity and actions by member states and potentially
The Great Lakes Region
(Scott Swanm, CSCAR, 2003)
the region.
Common demographic, economic, and development
trends affecting these states, the competitive fiscal
and social consequences of these trends; the real and
potential assets of the region; all provide a unique regional
identity. The region faces the challenge of building
on its current assets as a center of corporate leadership,
an immigrant gateway to the nation, and perhaps
the finest collection of research universities in the
world, to achieve prosperity and economic leadership
once again (Austin, 2005).
So what are the assets of these states as they look
to the future Probably not natural resources, although
the fresh water resources of the Great Lakes might temporarily
be an asset in areas such as tourism. Unfortunately,
human capital is also not currently an asset, both
because of aging (and perhaps declining) populations
and the relatively low priority given to education by a
manufacturing economy. The current infrastructure of
these states–both physical such as highways and industrial
facilities and policies such as tax structure and public
priorities–evolved to serve a manufacturing rather
than a knowledge economy. Today this infrastructure

83
represents more of a liability than an asset.
Yet there is one very unusual–indeed, unique–asset
possessed by this region: the strongest concentration
of flagship research universities in the world, as
represented by the Big Ten, or more correctly, the C.I.C.
(Committee on Institutional Cooperation) group, which
consists of the Big Ten universities plus the University
of Chicago. These twelve universities conduct more research,
produce more scientists and engineers, doctors
and lawyers, business executives and teachers, than
any collection of universities in the world, including
the University of California, the Ivy League, Oxford
and Cambridge, and the other leading universities in
Europe and Asia. Moreover, there is a long-standing
tradition of cooperation among these institutions (in
addition to their highly visible competition through
the Big Ten Athletic Conference). They work together
on both regional and national agendas, merging library
and research resources, and sharing curricula
and instructional resources with faculty and students.
Because of their land-grant traditions, they also have a
long history of public service and extension, not only
within their states but throughout the world.
Hence it seems natural to suggest that this roadmapping
exercise might be extended beyond a single state
(Michigan) to encompass a region facing similar challenges
and characterized by similar educational assets.
In fact, one might liken such an effort to that undertaken
by California in the 1950s, when the challenge and opportunities
afforded by a changing economy and population
stimulated the development of the California
Master Plan, a bold vision, which created a system of
universal post-secondary education, with the University
of California campuses at the helm, augmented by
the California State University System and the California
Community College System that together provided
a very unusual combination of world-class quality
with broad access. Today most agree that the California
Master Plan played a very critical role in providing the
state with exceptional regional advantage, creating the
strongest regional economy in the world.
Through generations of strong support and stewardship,
today the Great Lakes states have a collection
of flagship research universities not only comparable
but superior in many characteristics–quality, capacity,
breadth, global presence–to those of the California
Research Univesities in the Great Lakes States
(Scott Swanm, CSCAR, 2003)
institutions. Hence it is natural to question whether
a similar planning effort could be launched to weave
these formidable assets into a strategy to build regional
advantage. To be sure, working across state boundaries
and politics poses certain challenges, although California
faced similar challenges (North vs. South, urban vs.
agricultural interests). In fact, one might well consider
extending this regional study to international scope by
adding Ontario, a province with very similar economic
and demographic characteristics, with a world-class
flagship public research institution in the University of
Toronto.
The possibilities of such a regional planning activity
aimed at building regional advantage in a global,
knowledge-driven economy through a consortium of
world-class flagship public research universities are intriguing:
1. As the flagship universities of their states, these
institutions already set the pace for broader educational
activities, both at the post-secondary
and K-12 levels.
2. Each of these universities has built world-class
excellence in unique areas (e.g., Illinois in computer
technology, Minnesota in chemistry and
chemical technology, Ohio State in materials science
and technology, Michigan State and Penn
State in agricultural technology, Wisconsin and
Michigan in engineering, the natural and social
sciences, and biomedical science, Northwestern
in medicine and business administration,

84
and Chicago in the sciences). Aggregating these
“spires of excellence” by linking these institutions
would give the region the world’s leading
programs in a broad range of key knowledge
areas.
3. There is already a strong tradition of cooperation
among these institutions (through the Big
Ten and C.I.C.) across a broad array of activities,
ranging from academic to international to political
(and, of course, athletic).
4. These institutions are characterized by a long
tradition of global outreach and international
development that might enable them to coalesce
into a true “world university,” reaching into all
parts of the globe to open up new markets and
access world-class human capital.
5. The rapid evolution of digital technologies provides
powerful new paradigms to integrate together
the programs and activities of these institutions.
These institutions have long played
important leadership roles in developing these
technologies (e.g., supercomputing, the Internet
and successors such as Internet2, tools such
as browsers). Today entirely new technology
paradigms such as the complete digitization of
library collections and faculty research and instructional
activities (e.g., the Google-Michigan
project) hold out the potential of the ages-long
dream of universal access to knowledge.
6. These institutions also face very similar challenges
today as their states’ budgets struggle to
cope with staggering costs for health care, corrections,
security, and infrastructure in the face
of political forces demanding tax relief. In effect,
all of these institutions have already managed
to become predominantly privately supported
public institutions and developed the flexibility
and entrepreneurial skills to compete in an
increasingly aggressive marketplace, with their
quality and capacity essentially intact.
into what could become its knowledge center. Put another
way, while this region provided the muscle for
the manufacturing economy that powered the 20th century,
we believe it has the capacity to become the brain
of the 21st-century knowledge economy.
Hence, as the next stage in the roadmapping activity,
we propose broadening the analysis to a regional area
comprised of the “Big Ten” states (and perhaps including
Ontario) to develop a plan to transform what was
once the manufacturing center of the world economy

85
Appendix A
A Comparison: The Lt. Governor’s Commission
on Higher Education and Economic Growth
(Contributed by Laurel Park, Center for the Study of
Higher and Post-Secondary Education, University of
Michigan)
The Cherry Commission was convened through an
executive order by Michigan Governor Jennifer Granholm
in 2003. The Commission was charged with the
task of identifying strategies aimed at doubling the
number of Michigan residents with degrees, or other
“credentials of value,” within the next decade. As such,
the Commission functioned in a highly political environment.
While Commission and workgroup members
were drawn from a variety of organizations (educational,
political, social, non-profit, technical, service), workgroup
discussions and consideration of strategies were
ultimately driven by the “degree/credential of value”
agenda.
The report of the Cherry Commission differs from
the Technology Roadmap in several key respects. These
differences are by no means absolute but they represent
the philosophical and conceptual frameworks that
guided the development of each:
Context: As noted above, the Cherry Commission
was a political entity created to implement a political
agenda. In contrast, the Michigan Roadmap was
developed through the support of an independent
non-profit foundation, thus allowing more freedom
for creative and innovative thinking.
Environment: The Cherry Report is constrained to
a great extent by both the political environment in
which it was created and the social and economic
environments in which its audience reside. As an
independent exercise conducted primarily within
academe, the Roadmap is free from those constraints.
Goals: The Cherry Report is primarily output-oriented:
degrees or credentials of value. In contrast,
the Michigan Roadmap is both process- and outcome-oriented:
develop a “knowledge society,” enabling
Michigan’s transformation to a knowledge
economy. While it could be argued that some aspects
of the Michigan Roadmap are also output-oriented,
this planning effort focuses more on broad,
long-term strategies capable of adaptation and
evolution rather than policies targeted to a specific
end. This distinction is further reinforced by the
Cherry Report’s emphasis on “credits” (representing
knowledge) versus the Michigan Roadmap’s
emphasis on “competencies” (representing learning
and innovation).
Perspective: The Cherry Commission places the
responsibility for meeting the state’s future educational
needs primarily in the hands of its secondary
and post-secondary institutions. While the role of
the state and society are acknowledged, the majority
of the Commission’s recommendations require
action or innovation on the part of high schools,
colleges and universities. While the Michigan Roadmap
clearly identifies the role of educational institutions
in creating a populace that is prepared for
a global, knowledge-driven economy (particularly
the flagship research universities), it takes a broader

86
view of education and places it within a social/societal
perspective.
Focus: Technology. While the Cherry Report acknowledges
the impact of technology on the state’s
economy, it does not make this impact the focal point
of its analysis or recommendations. In fact, within
the Cherry Report technology receives the most
attention in the “Economic Benefits” section but it
is regarded as a dependent variable - an outcome
to aspire to - rather than an independent variable
- a factor affecting societal change. The Michigan
Roadmap focuses on technology and technological
innovation as key to the development of a society
of learning.
Scope: The Cherry Report focuses exclusively on
Michigan. The Michigan Roadmap encompasses a
regional and even global perspective.
The Cherry Report differs from the Michigan Roadmap
in other areas as well:
• The Report is focused on a specific, defined timeframe
and its recommendations are pegged to that
timeframe (the next decade). The Roadmap focuses
on both immediate and long-term strategies.
• The Report does not directly address the impact of
immigration on Michigan’s economy and society.
• The Report does not consider the mechanism for
implementing its proposals; in particular, funding
to do so. It also does not consider state and national
social or economic policies and the potential impact
on education caused by changes to those policies.
• The Report does not explicitly acknowledge that the
state’s current economic and labor environments are
not static but rather “moving targets” which could
change significantly over the next ten years.
• The Report and the Roadmap differ on the directionality
of the causal relationship between education
and economic growth. The Report sees education
(and, specifically, higher education) as the key
to attracting entrepreneurial and technological activity
to the state while the Roadmap encourages recruitment
of, and investment in, high-tech and entrepreneurial
activity to partner with and augment
Michigan’s world-class universities.
• While the Report envisions some overlap of educational
levels and institutional types (e.g., encouraging
concurrent high school-college study and advocating
the creation of applied baccalaureate degrees
in community colleges), for the most part it assumes
that the current educational structure (secondary
and post-secondary) will remain essentially unchanged
for the foreseeable future.
• While the Report acknowledges the emergence of
new and proprietary educational providers (e.g.,
University of Phoenix), it does not fully investigate
the potential impact of these providers on “traditional”
higher education institutions.
• While the Report suggests the educational institutions
would benefit from the development of strategic
alliances with non-educational entities, it does
not view this as a critical measure to the extent that
the Roadmap does.
There are, however, a few issues in which the Cherry
Report and the Roadmap are in at least partial agreement:
• Both acknowledge the impact and importance of
technology and technological innovation in the future
economy.
• Both acknowledge the importance of an educated
workforce to participate in a technology-driven
economy (although the definition of “educated” differs
significantly between the Report and the Roadmap).
• Both focus on economic prosperity, and the role of
education and the development of entrepreneurial
skills as key factors for prosperity.
• Both acknowledge the leading role that Michigan’s

87
flagship universities will play in the development of
the new knowledge-based economy (although the
Report includes Wayne State University on par with
UM and MSU).
• Both espouse the transfer of knowledge and innovation
from the campus to the marketplace, although
as noted above, the Report and the Roadmap differ
on the directionality of that transfer.
• Both call for new educational paradigms, although
for the most part the Report sees this shift occurring
within the current educational structure.
• Both suggest assessing current human resource and
physical infrastructure capacities with the state’s
colleges and universities.
• Both espouse public accountability among colleges
and universities.
• The Report’s call to establish a set of “minimum
core competencies” among high school and college
students mirrors somewhat the Roadmap’s recommendation
to teach the skills necessary for “synthesizing”
information. Again, however, the Report’s
proposal is geared to the goal of producing more
degrees/credentials of value.

88
Appendix B
The Millennium Project
The Millennium Project at the University of Michigan
is a small research center concerned with identifying
key technological, economic, and social forces
driving major change in society and then launching
research projects to better understand these forces,
their potential impact, and shaping strategies and
public policies to address them. It functions both as an
“over-the-horizon” futures scanning effort as well as a
“skunkworks” laboratory where actual prototyping experiments
are conducted. For example, the Millennium
Project played an important role in launching the Michigan
Virtual Auto College (later the Michigan Virtual
University), a CyberCamp for high school students,
and a series of studies concerning the impact of rapidly
evolving digital technology on the American research
university. More recent activities include an assessment
of the implications of current U.S. basic research capacity
on national leadership in technological innovation,
the development of new metrics for determining and
assessing federal R&D priorities, launching a new research
program on advanced energy sources for transportation
applications in a post-hydrocarbon economy
(including hydrogen-based fuels), and stimulating the
evolution of global university alliances.
James J. Duderstadt
The Millennium Project
The Millennium Project
The University of Michigan
Dr. James J. Duderstadt is President Emeritus and
University Professor of Science and Engineering at
the University of Michigan. Dr. Duderstadt received
his baccalaureate degree in electrical engineering with
highest honors from Yale University in 1964 and his
doctorate in engineering science and physics from the
California Institute of Technology in 1967. He joined
the faculty of the University of Michigan in 1968 as
professor of nuclear engineering, later becoming Dean
of the College of Engineering in 1981 and Provost and
Vice President for Academic Affairs of the University in
1986. He became President of the University of Michigan
in 1988 and served in this role until July, 1996. He
currently holds a university-wide faculty appointment
as University Professor of Science and Engineering and
also directs the University’s program in Science, Technology,
and Public Policy
Dr. Duderstadt’s teaching and research interests
have spanned a wide range of subjects in science, mathematics,
and engineering, including work in areas such
as nuclear fission reactors, thermonuclear fusion, highpowered
lasers, computer simulation, science policy,
higher education, and information technology. During
his career, Dr. Duderstadt has received numerous
national awards for his research, teaching, and service
activities, including the E. O. Lawrence Award for excellence
in nuclear research, the Arthur Holly Compton
Prize for outstanding teaching, the Reginald Wilson
Award for national leadership in achieving diversity,
and the National Medal of Technology for exemplary
service to the nation. He has been elected to numerous

honorific societies including the National Academy of
Engineering, the American Academy of Arts and Science,
Phi Beta Kappa, and Tau Beta Pi.
Dr. Duderstadt has served on and/or chaired numerous
public and private boards. These include the
National Science Board; the Executive Council of the
National Academy of Engineering, the Committee on
Science, Engineering, and Public Policy of the National
Academy of Sciences; the Nuclear Energy Research
Advisory Committee of the Department of Energy; the
Big Ten Athletic Conference; the University of Michigan
Hospitals; Unisys; and CMS Energy. He currently
chairs several major national study commissions in areas
including federal science policy, higher education,
information technology, and engineering research.
89

90
References
Almanac Issue. The Chronicle of Higher Education.
Washington, D.C., September 2004.
Assessing the U.S. R&D Investment. President’s
Council of Advisors on Science and Technology
Panel on Federal Investment in Science and
Technology and Its National Benefits, October
2002.
Atkins, Daniel E. (chair), Revolutionizing Science
and Engineering Through Cyberinfrastructure.
Report of the National Science Foundation Blue-
Ribbon Advisory Panel on Cyberinfrastructure.
Washington, D.C.: National Science Foundation,
2003.
Austin, John. “Defining a Great Lakes Economic
Agenda”, Brookings Institution, Washington, D.C.,
2005.
Austin, John, John Burkhardt, James Jacobs. Michigan
Lt. Governor’s Commission on Higher Education
and Economic Growth. Background Briefing for
Commission Members, Lansing, MI, 2004.
http://www.cherrycommission.org/meetings.htm
Bloch, Erich. National Science Foundation, testimony
to Congress, 1988.
Boulos, Michael, “Bill Gates and a Prescription for
Michigan’s Future”. President’s Perspective, Issue
4. Presidents Council of State Universities of
Michigan, Lansing, MI, 2005.
Breneman, David. “Peering Around the Bend:
The Leadership Challenges of Privatization,
Accountability, and Market-Based State Policy”.
Association of Governing Boards. Washington,
2005.
Brown, John Seely. “Growing Up Digital,” Change 32
(2) March, 2000, 10-20.
Brown, John Seely and Paul Duguid, The Social Life of
Information. Cambridge, Harvard Business School
Press, 2000.
CAL-ISI (California Institutes of Science and
Innovation). 2004. California Institutes of Science
and Innovation Home Page. Available online at:
http://www.ucop.edu/california-institutes/
Catton, Bruce. Michigan: A Bicentennial History. Norton:
New York, 1976.
Christensen, Clayton M. The Innovator’s Dilemma.
Cambridge: Harvard Business School Press, 1997.
Council on Competitiveness, National Innovation
Initiative. Washington, DC: Council on
Competitiveness, 2004. http://www.compete.
org/nii/
Davis, Stan and Jim Botkin, The Monster Under the Bed.
New York: Touchstone, 1994.
Dimond, Paul, private communication, 2005.
Dolence, Michael G. and Donald M. Norris,
Transforming Higher Education: A Vision for Learning
in the 21st Century. Ann Arbor: Society for College
and University Planning. 1995.
Drucker, Peter. “A Better Way to Pay for College”, Wall
Street Journal, May 9, 1991: A14.
Drucker, Peter. “Beyond the Information Revolution,”
Atlantic Monthly. 284:4 (October, 1999).
Duderstadt, James J. (chair). Engineering Research and
America’s Future: Meeting the Challenge of a Global
Economy. Washington, D.C.: National Academies
Press, 2003. www.nap.edu.
Duderstadt, James J. (chair). Assessing the Capacity
of the U.S. Engineering Research Enterprise.
Washington, D.C.: National Academies Press,
2005.
Duderstadt, James J., Daniel E. Atkins and Douglas
Van Houweling. Higher Education Faces the Digital
Age: Technology Issues and Strategies for American
Colleges and Universities. Washington: American
Council on Education, 2002.
Duderstadt, James J. and Farris W. Womack, The
Future of the Public University in America: Beyond the
Crossroads. Baltimore: Johns Hopkins University
Press, 2002.
Dykhuis, R. W. (1995). “OhioLINK: Vision, money, and

91
technology.” Computers in Libraries 15(2): 16.
The Economist, “The Brains Business: A Survey of
Higher Education”, September 10, 2005.
The Economist, “Special Report: Blacks in America”
August 6, 2005.
Feinstein, Abel and Sean P. McAlinden. Michigan: The
High-Technology Automotive State, Center for
Automotive Research, Altarum Institute. Lansing,
MI: Michigan Economic Development Council,
2001. http://medc.michigan.org/news/reports/
economic/
Finley, Nolan. “Attitude May Make Michigan the New
Mississippi”. Detroit News, Sunday, May 1, 2005.
Fish, Stanley. “Colleges Caught in a Vice”, Op-Ed,
New York Times, September 18, 2003.
Friedman, Thomas, The World Is Flat: A Brief History
of the 21 st Century. New York: Farrar, Strauss, and
Giroux, 2005.
Gartner Consulting, LinkMichigan, E-3 Ventures.
Lansing, MI: Michigan Economic Development
Council, 2001. http://medc.michigan.org/news/
reports/economic/
Gibson, William. Neuromancer. New York: Ace, 1984.
Glazer, Lou and Donald Grimes. A New Path to
Prosperity Manufacturing and Knowledge-Based
Industries as Drivers of Economic Growth. Ann Arbor,
MI: Michigan Future, Inc., 2004.
Goodstein, David, Out of Gas: The End of the Age of Oil,
New York: W. W. Norton, 2004
Gray, Kathleen. “State Gets Scraps of Questionable
Feast”. Detroit Free Press, November 27, 2004.
Gura, Mark and Bernard Percy, Recapturing Technology
for Education. New York: Rowman & Littlefield
Education, 2005.
Hirsch, Robert L., Project Leader, “Peakingof World
Oil Production; Impacts, Mitigation, and Risk
Management, U. S. Department of Energy,
February, 2005.
Hirshon, A. (1995). “Library strategic alliances and
the digital library in the 1990s: The OhioLINK
experience.” Journal of Academic Librarianship
21(5): 383.
Ikenberry, Stanley. “Uncertain and Unplanned: The
Future of Public Higher Education”. Policy Forum
Vol. 17, No. 3, Institute of Government and Public
Affairs, University of Illinois. Champaign: 2005
Information Technology in Michigan. Ann Arbor, MI:
Cyber-state.org, 2004. http://www.cyber-state.org
K-16 Coalition for Michigan’s Future, http://www.
michigank16.org
“Keeping the Public Colleges Afloat” New York Times,
2004.
Kristof, Nicholas, “The Greediest Generation”. New
York Times, 2005.
Kurzweil, Ray. The Age of Spiritual Machines: When
Computers Exceed Human Intelligence, New York:
Viking, 1999.
Levine, Arthur. “Higher Education’s New Status As a
Mature Industry,” Chronicle of Higher Education
(January 31, 1997), A48.
Library of Michigan, “Michigan Public Library
Statistical Report 2002”
http://www.michigan.gov/documents/hal_lm_
032059public_52617_7.pdf
Lingenfelter, Paul, et al. State Higher Education
Finance, FY 2003. Washington, DC: State Higher
Education Executive Officers, 2004.
Maass, Peter, ‘The Breaking Point”, New York Times
Sunday Magazine, August 21, 2005, p. 30.
MEDC, Attracting and Retaining Talent to Michigan.
Lansing, MI: Michigan Economic Development
Council, 2002.
MEDC, Benchmarks for the Next Michigan: Measuring
Our Competitiveness. Lansing, MI: Michigan
Economic Development Council, 2002. http://
medc.michigan.org/news/reports/economic/
MEDC, Next Michigan – Our Competitiveness
Action Agenda, Lansing. MI: Michigan Economic
Development Council, 2002. http://medc.
michigan.org/news/reports/
MEDC, The Michigan Economy, 1989-2002. Lansing,
MI: Michigan Economic Development Council,
2002); http://medc.michigan.org/news/reports/
economic/
MEDC, Workforce and Career Development: Building
upon Key Michigan Strengths .Lansing, MI:
Michigan Economic Development Council, 2002.
MEDC (May 14, 2001). “LinkMichigan” Available at
http://medc.michigan.org/cm/attach/94595AF5-
BAE2-4BEE-856A-22DA8A130538/linkmichigan2.
pdf
Milliken, William. “Anger, Bitterness, and Noise

92
Leave Michigan In the Dust”. Mackinac Regional
Conference, Detroit Regional Chamber, June, 2005.
Kane, Thomas and Peter R. Orzag. “Higher Education
Spending: The Role of Medicaid and the Business
Cycle”. Brookings Institution Policy Brief,
Washington, 2003.
Michigan Community College Association, “Virtual
Learning Collaborative”
http://vcampus.mcccvlc.org
Michigan Lt. Governor’s Commission on Higher Education
and Economic Growth, Lansing, MI, 2004.
http://www.cherrycommission.org/meetings.htm
Moe, Michael. The Knowledge Web: People Power– Fuel
for the New Economy. New York: Merrill-Lynch,
2000.
NRC, Committee on Developments in the Science
of Learning. How People Learn: Brain, Mind,
Experience, and School. National Research Council.
Washington: National Academy Press, 2000.
National Information Center, “Population Projects-
Percent Change from 200 to 2005”
http://www.higheredinfo.org/dbrowser/index.
phplevel=nation&mode=data&state=0&submeas
ure=107
National Intelligence Council, Mapping the Global
Future, Project 2020 (Washington: Government
Printing Office, 2004).
National Park Service, “Greenfield Village and Henry
Ford Museum”
http://www.cr.nps.gov/nr/travel/detroit/d37.
htm
National Science Board. Science and Engineering
Indicators, 2004. Washington: National Science
Foundation, 2004.
National Science Board. “State Indicators”, Science and
Engineering Indicators, Washington, DC: National
Science Foundation, 2004. http://www.nsf.gov/
sbe/srs/sein04/start.htm
Newman, Frank, Lara Couturier, and Jamie Scurry,
The Future of Higher Education: Rhetoric, Reality,
and the Risks of Market. San Francisco: Jossey-Bass
Publishers, 2004.
Newman, Frank and Lara K. Couturier. “The New
Competitive Arena: Market Forces Invade the
Academy,” Change 33 (5) September, 2001: pp. 11-
17.
New York Times Editorial, “Keeping the Public Colleges
Afloat”, (2004)
NRC, The Impact of Academic Research on Industrial
Performance. Washington, D.C.: National
Academies Press, 2003.
Ohio 3rd Frontier Project. 2004. Pioneering the 3rd
Frontier of Science and Innovation. Available
online at: http://www.ohio3rdfrontier.org/index.asp
PCSUM, “Universities Are Key To Michigan’s
Economic Recovery, Poll Says”. Lansing, MI:
President’s Council of State Universities of
Michigan, March 2004.
PCSUM, “Tuition Cost Seen as 45% of Full Price.”
Lansing, MI: President’s Council of State
Universities of Michigan, November 2004.
PCAST, Sustaining the Nation’s Innovation
Ecosystems, Information Technology
Manufacturing and Competitiveness, President’s
Council of Advisors on Science and Technology,
January 2004.
PCSUM, University Investment Commission. Lansing,
MI: President’s Council of State Universities of
Michigan, 2003.
PCSUM, “Universities Are Key to Michigan’s
Economic Recovery.” Lansing, MI: Presidents’
Council of State Universities of Michigan, 2004.
http://www.pcsum.org/news.html
Peckham, Howard, The Making of the University of
Michigan, 1817-1992. Ann Arbor, MI: University of
Michigan Press, 1967, 1992.
Pensky, Marc, “Digital Natives, Digital Immigrants”.
NCB University Press, Vol. 9, No. 5, 2001.
Peterson, Marvin W., and David D. Dill,
“Understanding the Competitive Environment
of the Postsecondary Knowledge Industry,”
in Planning and Management for a Changing
Environment, pp. 3-29, edited by Marvin W.
Peterson, David D. Dill, and Lisa A. Mets. San
Francisco: Jossey-Bass Publishers, 1997.
Press, Eyal and Jennifer Washburn, “The Kept
University”, The Atlantic Monthly, March, 2000,
pp. 39-54.
Price, Hank. The Long View: State University
Enrollments, Revenues, and Expenditures, FY1977
through FY 2002. Lansing, MI: Michigan House of
Representatives, 2003. http://www.pcsum.org/

93
reports.html
Public Sector Consultants. Report of the University
Investment Commission. Lansing, Michigan, 2003.
RAND, Vital Assets: Federal Investment in Research
and Development at the Nation’s Universities and
Colleges, RAND, 2004.
Raschke, Carl A. The Digital Revolution and the Coming
of the Postmodern University. New York: Routledge
Falmer, 2003.
Raven, Peter. “Science, Sustainability, and the Human
Prospect”, Science No. 297, pp. 954-8 (2002)
Scherer, F.M. New Perspectives on Economic Growth
and Technological Innovation. The Brookings
Institution, 1999.
Scientific American, Special Issue: Crossroads for Planet
Earth. September, 2005.
Seely, R. 2004. State Will Aid Stem-Cell Institute
Research Facility Will Be Built at UW-Madison.
Wisconsin State Journal (November 18): A1.
Available online at: http://www.madison.com/
archives/read.phpref=wsj:2004:11:18:393898:FRONT.
Selingo, Jeffrey. “The Disappearing State in Public
Higher Education.” Chronicle of Higher
Education, February 28, 2003, A22-A24.
Slaughter, Shiela and Larry L. Leslie (Contributor),
Academic Capitalism: Politics, Policies, and the
Entrepreneurial University (Baltimore: Johns
Hopkins University Press, 1997).
Stanford Research Institute. The Economic Impact
of Michigan’s Public Universities, Lansing, MI:
Presidents Council of the State Universities of
Michigan, 2002. http://www.pcsum.org/reports.
html
State of Texas, Office of the Governor. 2004. Gov.
Perry Calls for Renewal of Successful Enterprise
Fund, Creation of Emerging Technology Fund.
Press release, December 13, 2004. Available online
at: www.utsystem.edu/news/2004/GovPerryNew-
EmergingTechFund12-13-04.pdf.
U.S. Census Bureau, “Michigan Quick Facts”, 2004
http://quickfacts.census.gov/qfd/states/26000.
html
U.S. Census Bureau, “Michigan Facts”, 2005
Wiley, John. Forward Thinking: The University and
Wisconsin’s Economic Recovery, Chancellor’s Report.
Madison, WI: University of Wisconsin, 2003.
Wriston, Walter B., The Twilight of Sovereignty: How the
Information Revolution Is Transforming Our World.
New York: Scribner, 1992.
Wulf, William. A. “Warning: Information Technology
Will Transform the University,” Issues in Science
and Technology, Summer, 1995. 46-52.
Zemsky, Robert, William Massey, and Gregory Wegner,
Remaking the American University: Market-Smart and
Mission Centered. New York: 2005.
Zemsky, Robert and Gregory Wegner, “A Very Public
Agenda,” Policy Perspectives, Vol. 8, No. 2, 1998.